The Allocation of Expenditures and Time over Time

In the year 2018, the average high skilled single male worked more than 35 hours per week in the market and allocated more than 70 percent of expenditures to services. In the same year, the average low skilled female worked 22 hours per week in the market and allocated around 65 percent of expenditures to services. What might explain these differences at that point in time, and how they have developed over time? In this paper, I compile and analyze data related to time-use and the allocation of expenditures. The dataset that I compile is customized to fit the needs of my companion paper, Home Production, Expenditures, and Time Use, in which I propose and test a theory that includes home production.

Home Production, Expenditures, and Time Use

I propose a unified analysis of expenditures and time use, via a model in which households can produce services at home. I show that the model, which uses stable homothetic preferences and standard functional forms for home production, can match data for the U.S. about expenditures and time-use, both in the cross-section and the developments over time. For women, changes in social norms were important. Absent changes in social norms, the developments would have been vastly different, both in terms of how they allocated their time and in terms of how expenditures were allocated.

It Runs in the Family: Occupational Choice and the Allocation of Talent

Children frequently grow up to work in the same jobs as their parents. Using unique data on worker skills and personality traits, and administrative data on the labor market outcomes of Swedish men, we study how skills and parental background influence occupational choice, intergenerational mobility, and the allocation of talent in the economy. First, we document that sons are disproportionately more likely to follow into the same occupation as their fathers, across all skills and earnings levels. Second, we estimate a general equilibrium Roy model with costly occupational choice and heterogeneous entry barriers depending on parental background. We find that these entry barriers lead to misallocation: Equalizing entry costs across workers leads occupational following to fall by half. This leads to increased intergenerational mobility, with the largest income gains among sons of fathers in the bottom income decile. Third, exploiting structural change in employment in fathers' occupations, difference-in-differences estimates imply that occupational following leads to reduced earnings, concentrated among sons of low-income fathers and those whose skills are misaligned with those of incumbents in their father’s occupation.  Our findings suggest that equalizing career opportunities bring equity gains.

Monetary Policy and Liquidity Constraints: Evidence from the Euro Area

We quantify the relationship between the response of output to monetary policy shocks and the share of liquidity constrained households. We do so in the context of the euro area, using a Local Projections Instrumental Variables estimation. We construct an instrument for changes in interest rates from changes in overnight indexed swap rates in a narrow time window around ECB announcements. Monetary policy shocks have heterogeneous effects on output across countries. Using micro data, we show that the elasticity of output to monetary policy shocks is larger in countries that have a larger fraction of households that are liquidity constrained.

Business cycle asymmetry of earnings pass-through

How does the firm's role as an insurance provider vary over the business cycle? Using Swedish administrative data, I document that idiosyncratic firm productivity shocks are passed through workers' earnings asymmetrically. In non-recessions, firms are good insurers against negative shocks. In downturns, they pass through a larger share of their shock. Regardless of the state of the economy, instead, positive shocks are mainly passed through when sizeable. I rationalize these findings using a directed search model of the labor market with recursive contracts. Moral hazard risk associated with on-the-job search is key to generating pass-through and the increased risk of firm disaster in recessions is necessary for matching the empirical facts. As the wage growth distribution features procyclical skewness and acyclical variance, the model also suggests a new mechanism for explaining trends in income risk variation over the business cycle. Welfare calculations reveal that workers would be willing to give up a non-negligible share of consumption to avoid this source of uncertainty.

Inferring income properties from portfolio choices

Two main views exist on the nature of the labor income process: according to one, income shocks are very persistent and agents face similar life-cycle profiles - Restricted Income Profiles (RIP); according to the other, income shocks are not very persistent and life-cycle profiles are individual-specific - Heterogeneous Income Profiles (HIP). This paper studies the implications of these two views in a portfolio choice model in order to discover identification restrictions allowing to discern between them. I find that HIP and RIP imply different life-cycle patterns of the participation and conditional risky share choices but similar patterns of consumption and saving. Crucial for this result is the inclusion of cyclical skewness in the stochastic process for income, which enables us to correctly estimate the part of income risk deriving from the persistence of the shocks.

Preference heterogeneity and portfolio choices over the wealth distribution

What are the key elements required in generating portfolio choices over the wealth distribution in line with the data? In this paper, we argue that capturing preference heterogeneity across individuals is one of them. Using a partial equilibrium Bewley-type model with endogenous portfolio choice and cyclical skewness in labor income shocks, we show that heterogeneity in risk aversion, impatience and portfolio diversification is crucial to match the empirical schedules of unconditional risky share, participation and share of idiosyncratic variance in individual portfolios. At the same time, these elements generate dispersion in wealth through their heterogeneous effects on individuals' investment decisions resulting in a cross-sectional wealth distribution that provides a close fit of the data, particularly at the very top.

Political Finance Reform and Public Procurement:  Evidence from Lithuania. Can political donations buy influence? This paper studies whether firms trade political contributions for public procurement contracts. To answer this question, I focus on the Lithuanian political economy. Combining data on a large number of government tenders, the universe of corporate donors and firm characteristics, I examine how a ban on corporate donations affects the awarding of procurement contracts to companies that donated in the past. Consistent with political favoritism, contributing firms’ probability of winning goes down by five percentage points as compared to that of non-donor firms after the ban. Among different mechanisms, the hypothesis that corporate donors get confidential information on competing bids prevails. The empirical results are in line with predictions from a first-price sealed-bid auction model with one informed bidder. Evidence on firm bidding and victory margins suggests that contributing firms adjust their bids in order to secure contracts at a maximum revenue. I assess that tax payers save almost one percent of GDP thanks to the reform.

Gender Quotas and the Quality of Politicians. We analyze the effects of the introduction of gender quotas in candidate lists on the quality of elected politicians, as measured by the average number of years of education. We consider an Italian law which introduced gender quotas in local elections in 1993, and was abolished in 1995. As not all municipalities went through elections during this period, we identify two groups of municipalities and use a difference-in-differences estimation. We find that gender quotas are associated with an increase in the quality of elected politicians, with the effect ranging from 0.12 to 0.24 years of education. This effect is due not only to the higher number of elected women, who are on average more educated than men, but also to the lower number of low-educated elected men. The positive effect on quality is confirmed when we measure the latter with alternative indicators, it persists in the long run and it is robust to controlling for political ideology and political competition.

Affirmative Action and the Power of the Elderly. There is evidence that age matters in politics. In this article we study whether implementation of affirmative action policies on gender can generate additional effects on an alternative dimension of representation, namely, the age of politicians. We consider an Italian law which introduced gender quotas in candidate lists for local elections in 1993, and was abolished in 1995. As not all municipalities went through elections during this period, we can identify two groups of municipalities and use a difference-in-differences estimation to analyze the effect of gender quotas on the age of elected politicians. We find that gender quotas are associated with election of politicians that are younger by more than one year. The effect occurs mainly due to the reduction in age of elected male politicians and is consistent with the optimizing behavior of parties or of voters.

Let the Voters Choose Women. Female under-representation in politics can be the result of parties' selection of candidates and/or of voters’ electoral preferences. To assess the impact of these two channels, we exploit the introduction of Italian Law 215/2013, which prescribes both gender quotas on candidate lists and double preference voting conditioned on gender. Using a regression discontinuity design, we estimate that the law increases the share of elected female politicians by 22 percentage points. The result is driven by the increase in preference votes cast for female candidates, suggesting a salient role of double preference voting in promoting female empowerment in politics.

This thesis consists of three papers, which address different aspects of financial markets and institutions.

Equities and Inequality studies the relationship between investor protection the development of financial markets and income inequality. In the presence of market frictions, investor protection promotes financial development by raising confidence and reducing the costs of external financing. Developed financial systems spread risks among financiers and firms, allocating them to the agents bearing them the best. Therefore, financial development plays the twofold role of encouraging agents to undertake risky enterprises and providing them with insurance. By increasing the number of risky projects, it raises income inequality. By extending insurance to more agents, it reduces it. As a result, the relationship between financial development and income inequality is hump-shaped. Empirical evidence from a cross-section of sixty-nine countries, as well as a panel of fifty-two countries over the period 1976-2000, supports the predictions of the model.

How Does Financial Liberalization Affect Economic Growth? assesses the effects of international financial liberalization and banking crises on investments and productivity in a sample of 93 countries (at its largest) observed between 1975 and 1999. I provide empirical evidence that financial liberalization spurs productivity growth and marginally affects capital accumulation. Banking crises depress both investments and TFP. Both levels and growth rates of productivity respond to financial liberalization and banking crises. The paper also presents evidence of conditional convergence in productivity across countries. However, the speed of convergence is unaffected by financial liberalization. These results are robust to a number of econometric specifications.

Explaining Co-movements Between Stock Markets: US and Germany explains co-movements between stock markets by explicitly considering the distinction between interdependence and contagion. It proposes and implements a full information approach on data for US and Germany to provide answers to the following questions: (i) is there long-term interdependence between US and German stock markets? (ii) Is there short-term interdependence and contagion between US and German stock markets, i.e. do short-term fluctuations of the US share prices spill over to German share prices and is such co-movement unstable over high volatility episodes? The answers are no to the former and yes to the latter.

This thesis consists of four essays in empirical macroeconomics.

What Are the Effects of Fiscal Policy Shocks? A VAR-Based Comparative Analysis

The literature using structural vector autoregressions (SVARs) to assess the effects of fiscal policy shocks strongly disagrees on the qualitative and quantitative response of key macroeconomic variables. We find that controlling for differences in specification of the reduced-form model, all identification approaches used in the literature yield similar results regarding the effects of government spending shocks, but diverging results regarding the effects of tax shocks.

The Analytics of SVARs. A Unified Framework to Measure Fiscal Multipliers

Does fiscal policy stimulate output? SVARs have been used to address this question, but no stylized facts have emerged. I show that different priors about the output elasticities of tax revenue and government expenditures implied by the identification schemes generate a large dispersion in the estimates of tax and spending multipliers. I estimate fiscal multipliers consistent with prior distributions of the elasticities computed by a variety of empirical strategies. I document that in the U.S. spending multipliers are larger than the tax multipliers.

Computing DSGE Models with Recursive Preferences and Stochastic Volatility

This paper compares solution methods for computing the equilibrium of dynamic stochastic general equilibrium models with recursive preferences and stochastic volatility. The main finding is that a third-order perturbation is competitive in terms of accuracy with Chebyshev polynomials and value function iteration, while being an order of magnitude faster to run.

Business Cycle Accounting and Misspecified DSGE Models

This paper investigates how insights from the literature on business cycle accounting can be used to trace out the implications of missing channels in a baseline estimated dynamic stochastic general equilibrium model used for forecast and policy analysis.

This thesis consists of three essays.

The first essay, "Press and Leaks: Do Newspapers Reduce Toxic Emissions?", uses data on plant-level emissions in 2001-2009 from the Toxic Release Inventory of the US Environmental Protection Agency, coupled with data on location and content of newspapers, to investigate whether media coverage induces firms to reduce toxic emissions. The results show that an increase in Newspapers Density, that is the number of newspapers nearby the plant, raises the press coverage of the plant's toxic emissions and reduces the amount of these emissions. This association is larger in industries exposed to consumer pressure and in counties subjected to extreme negative health outcomes.

The second essay, "Gender Quotas, Female Politicians and Public Expenditures: Quasi-Experimental Evidence", estimates the effect of gender quotas on the election of female politicians and on public finance decisions in Spanish municipalities, using a Before-After Regression Discontinuity Design. Gender quotas have increased the percentage of female candidates and also, but to a lower extent, the percentage of female councilors. The difference between the two effects is due to the strategic positioning of candidates within lists. The effect of quotas on the election of female mayors and on the size and composition of municipal expenditures is not statistically different from zero.

The third essay, "Are attitudes endogenous to political regimes? Beliefs about working women in state-socialist countries", studies whether individual beliefs about gender roles are endogenous to political regimes, using a Difference-in-Differences analysis. The results suggest a significant difference in the evolution of attitudes towards gender roles between Europeans in state-socialist countries and other Europeans during the period 1947-1991. Central and Eastern Europeans who formed their attitudes during state socialism seem more likely to hold progressive beliefs regarding working women.

How do Community Contribution Requirements Affect Local Public Good Provision? Experimental Evidence from Safe Water Sources in Bangladesh We exploit the random assignment of communities selected to receive a safe drinking water program to various contribution requirements: cash, labor or no requirement to contribute. Imposing a cash contribution requirement greatly decreases program take-up, while imposing a labour contribution does not. Program impact is correspondingly lower under the cash contribution requirement than under the labour contribution requirement or contribution waiver. The cash contribution requirement screens out communities with low arsenic contamination, but screening does not lead to increased treatment effects on the treated. Our results suggest that there are substantial welfare gains to be made in such projects in poor communities by allowing households to contribute in labour rather than cash.

I define occupations that are employed in more industries as “broader” occupations. I study the implications of occupation-level broadness for mismatch of unemployed and vacancies across occupations and industries. In the cross-section, workers in broader occupations are better insured against industry-level shocks and less at risk of being mismatched. Using geographical variation in occupation-level broadness, I show that during the Great Recession, unemployed workers from broader occupations had higher job-finding rates and smaller increases in unemployment than those previously employed in more specialized occupations. I contrast these cross-sectional results to the aggregate implications of mismatch. To that end, I build a model where the resulting mismatch of an industry-level shock depends on how specialized the affected occupations are. The model extends the Lucas (1974) island setting with frictional intra-island labor markets and frictional inter-island mobility. Workers in broader occupations are insured against industry-level productivity shocks because they can stay in their occupation but work in other unaffected industries. When individuals from broad occupations move to other industries, they propagate the shock to more workers. This strong general equilibrium mechanism offsets the direct effect. The results indicate that recessions which cause more mismatch lead to larger unemployment risk for workers in specialized occupations, but do not cause larger fluctuations of the aggregate unemployment rate.   

I develop a model of the consumer good market where the individual’s search decision is consistent with balanced-growth preferences. Here, optimal search is independent of income but increases with the time endowment. I characterize the potentially multiple equilibria and test whether the model can replicate differences in observed shopping behavior across employed and unemployed individuals. Using the American Time Use Survey, I show that unemployed individuals have an almost 50 % larger time endowment available for leisure and shopping. Meanwhile, they only spend 18 % more time shopping than the employed. In the calibrated model, however, unemployed households will spend around twice as much time shopping as employed households. I argue that consumer-goods search models are not yet ready for business cycle analysis, and discuss ways of reconciling the model with the data.   

We study the impact of worker protection in an environment with heterogeneous match productivity and a constrained wage setting. Firms can either employ costly screening to determine the match quality, or hire workers out of their applicant pool at random, learn about the match quality, and disengage from bad matches. Thus, layoff protections intervene with a firm’s ability to screen matches. In our calibration, a policy that prevents layoffs reduces unemployment and increases consumption in the new steady state. However, the economy becomes more susceptible to productivity shocks. Two additional channels transmit productivity shocks when layoffs are regulated. First, the value of hiring at random is more volatile when separating bad matches is no longer an option. Second, additional screening in recessions worsens the composition of the unemployed pool. Consequently, recessions will be long lasting and hiring is lower even after the TFP shock has receded. We conclude that economies potentially have a higher average output under layoff regulations, but that this comes at the cost of higher volatility and jobless recoveries.

Economic Distress and Support for Far-right Parties – Evidence from Sweden. This paper studies the effects of economic distress on support for far-right parties. Using Swedish election data, I show that layoff notifications among low-skilled native-born workers account for 31 percent of the increased vote share for the Swedish far-right party the Sweden Democrats. The effect of layoff notifications on support for the Sweden Democrats is larger in areas with a high share of low-skilled immigrants, and in areas with a low share of high-skilled immigrants. These findings are in line with theories suggesting that voters attribute their impaired economic status to immigration, due to labor market concerns. Furthermore, I find no effects on voting for other anti-EU and anti-globalization parties, challenging the notion that economic distress increases anti-globalization sentiment. Using detailed survey data, I present suggestive evidence of how increased salience of political issues related to immigration channels unemployment risk into support for far-right parties.

The Origins of Common Identity: Division, Homogenization Policies and Identity Formation in Alsace-Lorraine. We exploit the quasi-exogenous division of the French regions Alsace and Lorraine after the Franco-Prussian War in 1870 due to disagreements in the German leadership to provide evidence of group identity formation within historically homogeneous regions. People in the treated area, which was exposed to repressive homogenization policies aimed to suppress group identity, express a stronger regional identity and support more regional autonomy today. Using a regression discontinuity design at the municipal level, we find that support for two crucial referenda, which would have increased regional autonomy, subscription rates to regional newspapers, and regionalist party votes are significantly higher in the treated area. The results are robust across different specifications and bandwidths, and not driven by language differences, large agglomerations or distance to foreign countries. The differences in regional identity are strongest for the first two age cohorts after World War II and become weaker for later generations.

Gender Differences in Revenge and Strategic play: A Natural Experiment. This paper provides new evidence of gender differences in retaliatory behavior. Using game show data from a natural setting where stakes are high, we ask whether men are more likely to retaliate following an attack and whether the gender of the target matters for this decision. The behavior studied in this paper is the decision of whom to send the question to in a quiz show setting. We observe a 23 percent gender gap in the propensity to retaliate: women are less likely to seek revenge. The gender of the target matters for women but not for men, with women being more likely to retaliate against men than women. In addition, we show that retaliation is a successful way to avert future attacks in the short term. This is especially true for women, yet we find that women seek less revenge than men.

The Long-Run Impact of Protestant Missionary Activity on Female Labour-Force Participation

Research has shown that missionary activity, in general, and Protestant missionary activity, in particular, has had a long-lasting positive effect on literacy, education and democratic values. In this chapter, I analyse the differential effect of early 20th century Protestant and Catholic missionary activity in three former British colonies - Kenya, Tanzania and Uganda - on female labour-force participation with a particular focus on formal-sector employment. Using survey data, I find that Protestant missionary activity, compared to Catholic missionary activity, has a persistent positive relationship with education, especially for women and girls, is associated with greater female empowerment within the household and increases in the likelihood that women are employed full time, in non-agricultural skilled work and that they earn cash wages. Furthermore, with a novel dataset on public sector employees in Tanzania, I find that greater Protestant missionary activity, as measured by the number of Protestant mission stations in a district, is positively related to higher shares of female employees, especially civil servants, and an increase in the likelihood that a Local Government Authority is led by a woman.

The Impact of Reservation on Female Representation - Evidence from Uttar Pradesh

India has a policy of reserving certain political positions for women and marginalised caste-groups which has increased their representation in local governments. In this chapter, I use the rotating design of India's reservation policy to estimate what happens in the election following reservation. I explicitly look at reservation for women with and without caste restrictions separately. I find that in the election following reservation for women there is an increase in the share of women mayors with particularly strong effects for lower-caste women where the share of lower-caste women mayors increases by 80%. I find limited evidence that this is driven by the re-election of incumbents but, instead, that it is driven by increases in the quality and quantity of candidates. In the election following reservation for women, I estimate an increase in the number of candidates and their quality, as measured by literacy, for both male and female candidates. 

Voting from Abroad: Assessing the Impact of Local Turnout on Expatriates' Voting Behaviour

Over 150 countries allow expatriate citizens to vote in their country of origin. Yet, little is known about their voting behaviour and how this is affected by host countries. Using unique micro-data on Chilean expatriates living in Europe, we study how the host country's turnout affects expatriates' electoral participation in the 2017 Chilean Presidential election. We focus on the 2014 European Parliament election turnout in the district of the Chilean's geocoded residence and exploit local transitory shocks to the cost of voting given by the rainfall on the day of the election. We find that a 1 percentage point increase in the host country's turnout decreases the electoral participation of Chilean expatriates by nearly 1 percentage point. This suggests a trade-off between political engagement in host country and home country politics. We find a stronger impact for young Chileans and those living in small communities, and in localities more welcoming to migrants.

The dissertation consists of three self-contained essays on Public Finance.

“News Droughts, News Floods and U.S. Disaster Relief” studies the mass media's influence on the U.S. government response to about 5,000 natural disasters in developing countries in 1968-2002. These disasters took around 63,000 lives and affected 125 million people per year. Given the huge losses involved, it is essential that disaster relief is provided to those most in need. We show that U.S. disaster relief depends on the occurrence of other newsworthy events at the time of the disaster, such as the Olympic Games or the O.J. Simpson Trial, which are obviously unrelated to need. We argue that the only plausible explanation for this is that relief decisions are driven by news coverage of disasters, and that this news coverage is crowded out by other newsworthy events.

“Fiscal Policy and Retirement in the Twentieth Century” proposes a model that explains the trend in labor supply among older workers through changes in fiscal policy, including social security. The essay re-introduces social security as a major determinant of retirement behavior, while simultaneously offering an explanation to the two main puzzles in the literature: (i) the small contemporary retirement elasticities and (ii) the drop in the retirement age prior to the introduction of social security.

“Sustainable Fiscal Policy and the Retirement Decision” concerns the sustainability of fiscal policy in aging economies and the retirement decision. The essay develops an applied general equilibrium model, where the retirement age is endogenous and current fiscal policy is a response to future demographic developments. Three policies are analyzed: (1) raising taxes (2) reducing the replacement rate and (3) raising the Full Retirement Age. All policies are found to have a substantial impact on retirement. Sustaining fiscal policy will result in falling interest rates, inducing a general delay in retirement. This general equilibrium effect on retirement can be substantially larger than the direct effect of changing social security incentives.

Structural change in a two-sector model of the climate and the economy introduces issues concerning substitutability among goods in a two-sector economic growth model where emissions from fossil fuels give rise to a climate externality. Substitution is modeled using a CES-production function where the intermediate inputs differ only in their technologies and the way they are affected by the climate externality. I derive a simple formula for optimal taxes and resource allocation over time and highlight model sensitivity w.r.t the elasticity of substitution and distribution parameters.

Energy Balance Climate Models and General Equilibrium Optimal Mitigation Policies  develops a one-dimensional energy balance climate model with heat diffusion and anthropogenic forcing across latitudes driven by global fossil fuel use coupled to an economic growth model. Our results suggest that if the implementation of international transfers across latitudes are not possible or costly, then optimal taxes are in general spatially non-uniform and may be lower at poorer latitudes.

Energy Balance Climate Models, Damage Reservoirs and the Time Profile

of Climate Change Policy explores optimal mitigation policies through the lens of a latitude dependent energy balance climate model coupled to an economic growth model. We associate the movement of an endogenous polar ice cap with the idea of a damage reservoir being a finite source of climate related damages affecting the economy. The analysis shows that the introduction of damage reservoirs  can generate multiple steady states and Skiba points.

Assessing Sustainable Development in a DICE World investigates a method for assessing sustainable development under climate change in the Dynamic Integrated model of Climate and the Economy (DICE-2007 model). The analysis shows that the sustainability measure is highly sensitive to the calibration of the inter-temporal elasticity parameter and discount rate of the social welfare function.

Climate Policies and Input Substitution over Time

This paper investigates quantitatively how the impact of climate policies such as a carbon tax differs over the short and the long run in the macroeconomy. We document limited possibilities to switch from fossil fuels to green alternatives over short time horizons. Over more extended periods, however, this substitutability increases significantly. The same pattern holds for aggregate energy in the production process so that the energy intensity of production can only decrease in the long run without limiting output. We then build a quantitative macroeconomic growth model that accounts for these patterns through a technology-choice channel. We find that, in order to achieve similar emission targets, carbon taxes should be increased by about 10% permanently compared to models that focus on the long-run only. Economic costs of doing so are relatively small, especially in the short run. Additionally, we find that, quantitatively, inter-fuel substitution possibilities are much less important than the economy’s overall energy intensity.

The Decline in Energy Intensity

Over the past 50 years, energy intensity—measured as the energy used per unit of value added—has decreased significantly in the U.S. This paper investigates the key factors behind this decline and explores whether the trend is likely to continue. The analysis reveals that, without sectoral shifts—particularly the move from industry to services—energy intensity would have declined by an additional three percent. Technological advancements account for more than half of the observed reduction in energy intensity. Additionally, the economy is increasingly shifting towards electrification. An accounting exercise modeling various energy types is performed to replicate the data, providing further insights into the role of different energy sources behind this trend.

Climate Risk: Transition or Physical?

This paper investigates the multifaceted nature of climate risk for firms, focusing on both direct physical and transition risks. This study analyzes over two decades of self-reported data from thousands of publicly traded U.S. companies, from 2002 to 2023 to develop a comprehensive Climate Risk Index (CRI) for a deeper understanding of how firms perceive climate-related risks. The findings indicate that transition risks are the primary drivers of climate risk for firms, followed by the direct impacts of climate change and spillover effects among industries. The energy sector is the most vulnerable sector, followed by agriculture, transportation, and real estate.

Asset pricing implications of a DSGE model with recursive preferences and nominal rigidities. I study jointly macroeconomic dynamics and asset prices implied by a production economy featuring nominal price rigidities and Epstein-Zin (1989) preferences. Using a reasonable calibration, the macroeconomic DSGE model is consistent with a number of stylized facts observed in financial markets like the equity premium, a negative real term spread, a positive nominal term spread and the predictability of stock returns, without compromising the model's ability to fit key macroeconomic variables. The interest rate smoothing in the monetary policy rule helps generate a low risk-free rate volatility which has been difficult to achieve for standard real business cycle models where monetary policy is neutral. In an application, I show that the model provides a framework for analyzing monetary policy interventions and the associated effects on asset prices and the real economy.

Macroeconomic news and the stock market: Evidence from the eurozone. This paper is an empirical study of excess return behavior in the stock market in the euro area around days when important macroeconomic news about inflation, unemployment or interest rates are scheduled for announcement. I identify state dependence such that equity risk premia on announcement days are significantly higher when the interests rates are in the vicinity of the zero lower bound. Moreover, I provide evidence that for the whole sample period, the average excess returns in the eurozone are only higher on days when FOMC announcements are scheduled for release. However, this result vanishes in a low interest rate regime. Finally, I document that the European stock market does not command a premium for scheduled announcements by the European Central Bank (ECB).

The impact of ECB monetary policy surprises on the German stock market. We examine the impact of ECB monetary policy surprises on German excess stock returns and the possible reasons for such a response. First, we conduct an event study to asses the impact of conventional and unconventional monetary policy on stock returns. Second, within the VAR framework of Campbell and Ammer (1993), we decompose excess stock returns into news regarding expected excess returns, future dividends and future real interest rates. We measure conventional monetary policy shocks using futures markets data. Our main findings are that the overall variation in German excess stock returns mainly reflects revisions in expectations about dividends and that the stock market response to monetary policy shocks is dependent on the prevailing interest rate regime. In periods of negative real interest rates, a surprise monetary tightening leads to a decrease in excess stock returns. The channels behind this response are news about higher expected excess returns and lower future dividends.

Experience-based Learning, Stock Market Participation and Portfolio Choice

Recent evidence suggests that lifetime experiences play an important role in determining households' investment choices. I incorporate these findings and the fact that household portfolios are underdiversified into an otherwise standard life-cycle model and examine to what extent they can help resolve long-standing puzzles in the literature regarding stock market participation and the fraction of financial wealth invested in risky assets. I show that experience-based learning about returns creates a positive correlation between a household's position in the wealth distribution and its optimism about future returns. The wealthy consequently increase their investment in risky assets, while participation is limited among poor households. I find that in a reasonably calibrated quantitative model, this mechanism is able to close approximately half of the gap between the participation rates observed in the data and the predictions from standard models.

Health Dynamics and Heterogeneous Life Expectancies

In this paper, we provide improved estimates for age-dependent health transitions and survival probabilities for different subsamples of the US population. The estimated yearly transition matrices can be used in any life-cycle model where health and survival dynamics are of interest. The results show substantial heterogeneity in life expectancy in the population. For a 70-year-old man in excellent health, the probability of reaching his 80th birthday is around 75%, while the corresponding probability for a man in poor health is just below 40%.

Subjective Life Expectancies, Time Preference Heterogeneity and Wealth Inequality

Time preference heterogeneity is one of the potential sources of wealth inequality, but preferences are difficult to measure and quantify. In this paper, we investigate one source of time preference heterogeneity: heterogeneity in life expectancy. We document a systematic bias in subjective survival beliefs within cohorts that exacerbates the heterogeneity found in the population: individuals with a low survival probability relative to their peers underestimate their life expectancies, while individuals with a high survival probability overestimate theirs. We introduce survival heterogeneity into an otherwise standard overlapping-generations model and let survival probabilities and beliefs evolve stochastically according to a health and death process estimated from micro data. We find strong effects of life expectancy heterogeneity on within-cohort wealth inequality, but small effects on economy-wide wealth inequality.

On the Redistributive Effects of Government Bailouts in the Mortgage Market

In this paper we study the aggregate and distributional consequences of government bailout guarantees in the US mortgage market. We construct a model with aggregate risk in which competitive financial intermediaries issue mortgages to households that can default on their debt. Default probabilities are priced into mortgage interest rates unless a government bailout guarantee makes the lenders whole even in economic downturns in which foreclosure rates surge. We use the model to assess the extent to which bailout guarantees lead to excessive mortgage lending, household leverage and foreclosures in episodes of housing crises, as well as excess volatility in house prices in severe recessions.

This thesis consists of three self-contained essays.

Essay 1, "Dispatchers", is a study of a specialized service sector that has arisen in many developing countries.

It is a well-established fact that the government bureaucracy in many developing countries is large, difficult to understand, non-transparent and time-consuming. However, "de jure" procedures sometimes have little to do with how firms or individuals actually go about when dealing with the government bureaucracy. One institution that has emerged is a specialized intermediary, henceforth called dispatcher, that assists individuals and firms in their contacts with the public sector. A model is developed to study the effects of dispatchers on time and resources spent in obtaining licenses, on informality and on the incentives of bureaucrats and dispatchers to make regulation more/less complicated.

Essay 2, "Informal firms, investment incentives and formalization", studies informal firms in developing countries.

In a typical developing country, the majority of small firms are informal and entry costs into formality are high. What can we expect in terms of firm investment, growth and formalization in such a setting? I show that investment and growth trajectories differ substantially between firms that choose to formalize and those that do not. The formalization decision depends non-trivially on the informal firm's productivity. This, in turn, has an effect on how policies should be designed. The long-run firm size distribution exhibits a "missing middle" and depends on the initial firm-level stock of capital, a result that can be interpreted as a poverty trap.

Essay 3, "Compositional and dynamic Laffer effects in a model with constant returns to scale", studies dynamic effects of tax cuts.

The possibility of tax cuts paying for themselves over time seems like an attractive option for policy makers. In a constant returns to scale model, I study conditions under which reductions in capital taxes are self-financing

This thesis consists of three essays in environmental and health economics.

The UK Clean Air Act, Black Smoke, and Infant Mortality

This paper estimates the effects of the 1956 UK Clean Air Act on infant mortality. Using novel data, I exploit the seasonality in demand for coal to analyze the effects of a staggered expansion of a ban on local smoke emission. The findings show that the policy eliminated the seasonal difference in air quality as well as infant mortality. According to my instrumental variables estimates, the reduction in air pollution between 1957 and 1973 can account for 70 % of the observed decline in infant mortality during the same period. The results are relevant to explain the fast decline in post-war infant mortality in developed countries and understand the effect of pollution on infant mortality in many developing countries.

A Fine Solution to Air Pollution?

This paper studies the effect of an exogenous change in air pollution regulation enforcement on regulation compliance. I exploit the spatial and temporal variation in the roll-out of zonal bans on smoke from coal in densely populated areas in England between 1963 – 1973 to study the effect of regulation on air pollution when the monetary punishment if convicted is doubled. I find that the increase in fine size increased the effect of the regulation on air pollution by 37 percent. However, evidence suggests that the poorest households disproportionally carried the cost of the marginal improvement in air quality from an increase in fine. The findings highlight the distributional concerns associated when designing an effective environmental regulation.

Environmental Regulation and Firm Performance

This paper investigates the effect of environmental regulation in England in the 1960 – 70s on changes in employment and the entry and exit of manufacturing plants. It matches 1 km² grid resolution plant data for multiple years with novel data on the location and timing of a roll-out of a ban on bituminous coal, the leading source of energy and heating in industry at the time. I show that the regulation negatively affected employment in low-productive plants but increased the probability of survival, employment, and the entry of high-productive plants. I present a simple theoretical model with heterogeneous firms and find empirical evidence in line with model predictions.

Monetary Policy and Liquidity Constraints: Evidence from the Euro Area

We quantify the relationship between the response of output to monetary policy shocks and the share of liquidity constrained households. We do so in the context of the euro area, using a Local Projections Instrumental Variables estimation. We construct an instrument for changes in interest rates from changes in overnight indexed swap rates in a narrow time window around ECB announcements. Monetary policy shocks have heterogeneous effects on output across countries. Using micro data, we show that the elasticity of output to monetary policy shocks is larger in countries that have a larger fraction of households that are liquidity constrained.

Reconciling Empirics and Theory: The Behavioral Hybrid New Keynesian Model

Structural estimates of the standard New Keynesian model are at odds with the microeconomic estimates. To reconcile these findings, we develop and estimate a behavioral New Keynesian model augmented with backward-looking households and firms. We find (i) strong evidence for bounded rationality, with a cognitive discount factor estimate of 0.4 at a quarterly frequency; and (ii) that the behavioral setting with backward-looking agents helps us harmonize the New Keynesian theory with empirical studies. We suggest that both cognitive discounting and anchoring are essential, first, to match the empirical estimates for certain parameters of interest and, second, to obtain the hump-shaped and initially muted impulse-response functions that we observe in empirical studies.

HANK beyond FIRE

The transmission channel of monetary policy in the benchmark New Keynesian (NK) framework relies on the counterfactual Full–Information Rational–Expectations (FIRE) assumption, both at the partial and general equilibrium (GE) dimensions. We relax the Full-Information assumption and build a Heterogeneous-Agents NK model under dispersed information. We find that the amplification multiplier is dampened. This result is explained by the lessened and lagged role of GE effects in our framework. We then conduct the standard full-fledged NK analysis: we find that the determinacy region is widened as a result of as if aggregate myopia and show that our framework beyond FIRE does not suffer from the forward guidance puzzle. Finally, we find that transitory “animal spirits” shocks generate persistent effects in output and inflation. 

Inflation Persistence, Noisy Information and the Phillips Curve

A vast literature has documented that US inflation persistence has fallen in recent decades. However, this empirical finding is difficult to explain in monetary models. Using survey data on inflation expectations, I document a positive co-movement between ex-ante average forecast errors and forecast revisions (suggesting forecast sluggishness) from 1968 to 1984, but no co-movement afterwards. I extend the New Keynesian (NK) setting with noisy and dispersed information about the aggregate state, and show that inflation is more persistent in periods of greater forecast sluggishness. My results show that the change in firm forecasting behavior, documented in survey data, explains around 90% of the fall in inflation persistence since the mid 1980s. I also find that the disconnect between inflation and the real side of the economy in recent decades can be explained by the change in information frictions. Contrary to the literature which has emphasized a flattening of the NK Phillips curve in recent data, I do not find any evidence of the change in the structural slope of the Phillips curve once I control for the change in information frictions.

This thesis consists of three essays on macroeconomic aspects of climate change.

Technological Trends and the Intertemporal Incentives For Fossil-Fuel Use analyzes how (the expectations about) the future developments of different kinds of technology affect the intertemporal incentives for fossil-fuel use. I find that improvements in the future state of technologies for alternative-energy generation, energy efficiency and total factor productivity all increase fossil-fuel use before the change takes place. The effect of changes in the efficiency of non-energy inputs is the reverse, while the effect of changes in fossil-fuel based energy technology is ambiguous. These conclusions are robust to a number of variations of the assumptions made.

The Role of the Nature of Damages considers to what extent the choice of modeling climate impacts as affecting productivity, utility or the depreciation of capital affects the behavior of integrated assessment models. I carry out my analysis in two different ways. Firstly, under some simplifying assumptions, I derive a simple formula for the optimal tax on fossil-fuel use that adds up the three different types of climate effects. Secondly, I use a two-period model with exogenous climate to analyze how the allocation of fossil-fuel use over time is affected by the effects of climate change. I find that this is sensitive to the assumptions made.

Indirect Effects of Climate Change investigates how direct effects of climate change in some countries have indirect effects on other countries going through changing world market prices of goods and financial instruments. When calculating the total effects of climate change, these indirect effects must also be taken into account. I first derive these indirect effects in a many-country model. Reaching agreements about reductions in the emissions of greenhouse gases is made difficult by the negative correlation there seems to be between emissions of greenhouse gases and the vulnerability to climate change. I argue, based on a stylized two country example, that trade in goods will tend to make the countries' interests more aligned while trade in financial instruments will tend to make the countries' interests less aligned.

This thesis consists of three self-contained essays dealing with different aspects of macroeconomics and political Economy.

The Relative Price of Investment Goods and Sectoral Contract Dependence

I develop a quantitative model to explain the relationship between TFPs at the aggregate and sector levels and contracting institutions across countries. The incomplete contract enforcement induces distortions in the production process which come from the “hold up” problem between a final goods firm and its suppliers. Because investment goods sector is more contract dependent, its productivity suffers more from the distortion. In turn, countries endowed with weaker contract enforcement institutions face higher relative prices of investment goods.

A Ricardian Model of the Labor Market with Directed Search

I analyze how search friction affects the allocation in a Ricardian model of the labor market. The equilibrium shows that the matching pattern is partially mixed: Some tasks are only performed by skilled workers; some are only performed by unskilled workers; the remaining tasks are performed by both skilled and unskilled workers. The mixed matching pattern implies a mismatch in equilibrium. It turns out that the reason for the mismatch has its roots in search friction. In addition, I show labor market institutions have interesting implications for the unemployment rate and mismatch.

A Dynamic Analysis of the Free-rider Problem

I argue that special interest groups overcome their free-rider problem thanks to distorted government policy. As policy confers monopoly privileges on a group, it can also preserve and promote group’s organization. The key to sustaining the organization of the group is a dynamic incentive: when distorted policy generates rents for a group, each member of the group wish to make contributions not just to raise their rents today; they want to sustain their cooperation so that they will be able to influence policy in the future.

Contribution Requirements and Redistribution Decisions: Experimental Evidence from Bangladesh uses a controlled experiment to assess the effects of requiring co-funding to development programs on the efficiency and distribution of benefits within the community.

Market Access and Quality Upgrading: Evidence from Randomized Experiments tests if increasing reward to quality produce improves profits, agricultural productivity, and input use, using a randomized experiment in Uganda. 

How do community contribution requirements affect local public good provision? Experimental evidence from safe water sources in Bangladesh evaluates how community contribution requirement –in cash and labour– change take-up and impact of a development intervention through a randomized experiment of water source construction.

Do community water sources provide safe drinking water? Evidence from a randomized experiment in rural Bangladesh exploits a random experiment to analyse how effectively the construction of community water sources improves drinking water quality.

Predicted COVID-19 fatality rates based on age, sex, comorbidities, and health system capacity extrapolates adjustments to estimate COVID-19 fatality rates from high-income to lower-income regions.

The Macroeconomics of Pandemics in Developing Countries: an Application to Uganda models how optimal pandemic containment varies from high- to lower-income countries.

Measuring Job Openings: Evidence from Swedish Plant Level Data. In modern macroeconomic models “job openings'' are a key component. Thus, when taking these models to the data we need an empirical counterpart to the theoretical concept of job openings. To achieve this, the literature relies on job vacancies measured either in survey or register data. Insofar as this concept captures the concept of job openings well we should see a tight relationship between vacancies and subsequent hires on the micro level. To investigate this, I analyze a new data set of Swedish hires and job vacancies on the plant level covering the period 2001-2012. I find that vacancies contain little power in predicting hires over and above (i) whether the number of vacancies is positive and (ii) plant size. Building on this, I propose an alternative measure of job openings in the economy. This measure (i) better predicts hiring at the plant level and (ii) provides a better fitting aggregate matching function vis-à-vis the traditional vacancy measure.

Firm Level Evidence from Two Vacancy Measures. Using firm level survey and register data for both Sweden and Denmark we show systematic mis-measurement in both vacancy measures. While the register-based measure on the aggregate constitutes a quarter of the survey-based measure, the latter is not a super-set of the former. To obtain the full set of unique vacancies in these two databases, the number of survey vacancies should be multiplied by approximately 1.2. Importantly, this adjustment factor varies over time and across firm characteristics. Our findings have implications for both the search-matching literature and policy analysis based on vacancy measures: observed changes in vacancies can be an outcome of changes in mis-measurement, and are not necessarily changes in the actual number of vacancies.

Swedish Unemployment Dynamics. We study the contribution of different labor market flows to business cycle variations in unemployment in the context of a dual labor market. To this end, we develop a decomposition method that allows for a distinction between permanent and temporary employment. We also allow for slow convergence to steady state which is characteristic of European labor markets. We apply the method to a new Swedish data set covering the period 1987-2012 and show that the relative contributions of inflows and outflows to/from unemployment are roughly 60/30. The remaining 10\% are due to flows not involving unemployment. Even though temporary contracts only cover 9-11\% of the working age population, variations in flows involving temporary contracts account for 44\% of the variation in unemployment. We also show that the importance of flows involving temporary contracts is likely to be understated if one does not account for non-steady state dynamics.

The New Keynesian Transmission Mechanism: A Heterogeneous-Agent Perspective. We argue that a 2-agent version of the standard New Keynesian model---where a ``worker'' receives only labor income and a “capitalist'' only profit income---offers insights about how income inequality affects the monetary transmission mechanism. Under rigid prices, monetary policy affects the distribution of consumption, but it has no effect on output as workers choose not to change their hours worked in response to wage movements. In the corresponding representative-agent model, in contrast, hours do rise after a monetary policy loosening due to a wealth effect on labor supply: profits fall, thus reducing the representative worker's income. If wages are rigid too, however, the monetary transmission mechanism is active and resembles that in the corresponding representative-agent model. Here, workers are not on their labor supply curve and hence respond passively to demand, and profits are procyclical.

Consumption Dynamics under Time-Varying Unemployment Risk We study the response of households' demand for durable goods to fluctuations in unemployment risk. First, using survey data, we document that household durable expenditures react strongly to unemployment risk, while the effect on nondurable expenditures is indistinguishable from zero. Second, we construct a buffer-stock savings model that includes adjustment frictions for durable goods. We show that although not targeted in the calibration, the model reproduces the semi-elasticities of expenditures to unemployment risk estimated in the data. Third, using the model, we find that the inclusion of adjustment frictions raises the aggregate demand response of durable goods to fluctuations in perceived unemployment risk by approximately 200 percent. Moreover, the aggregate consumption dynamics are state dependent. Upon experiencing an adverse risk shock, the responsiveness of durable goods demand to the interest rate and income changes is dampened, thus constraining monetary and fiscal transfer policies in stabilizing consumption during recessions.

The Labor-Market Origins of Cyclical Income Risk We use Danish administrative data 1980-2013 to study the underlying mechanisms generating fluctuations in income risk. We partition the population into 37 narrowly defined educational categories and document the cyclicality of labor income risk for each category separately. For the individual educational categories, mean income growth is strongly correlated with income growth skewness, with an average correlation of 0.87-0.88. We show that the connection between income growth skewness and mean income growth is not only strong in the time dimension, but also in the cross section. Across the 37 educational categories, the correlation between mean income growth and income growth skewness is 0.93-0.96. We show that labor-market frictions together with variations in productivity growth generate the relationship between mean income growth and income growth skewness. In a quantitative job-ladder model, variations in productivity growth quantitatively capture both the time-series and cross-sectional relationship. In contrast, variations in the job-finding rate, the job-separation rate and the offer-arrival rate for employed fail to generate the relationship between mean income growth and income growth skewness in our framework.

A Pareto-Distribution Perspective on Top-Income Gender Disparities We propose a novel decomposition of top-income gender disparities into a top-income gender gap coefficient, capturing the absolute underrepresentation of women in the top, and a glass ceiling coefficient, capturing the relative underrepresentation of women at the very top given the representation of women at the top. The decomposition uses that the top of both the male and female income distributions are well approximated by Pareto distributions. We apply our decomposition to Danish labor income data 1980-2013. We find that the gender gap coefficient is slowly and steadily falling over the whole period while the glass ceiling coefficient has been stable since 1995. We perform heterogeneity analysis along three dimensions. First, we perform the decomposition for different age groups. The glass ceiling coefficient has been largely stable across both time and age groups since 1995. Second, we perform the decomposition for parents and non-parents. The glass ceiling coefficient is larger for parents, but this stems from the different income distribution of fathers and non-father men. Mothers and non-mothers have similar glass ceiling characteristics. Third, we perform the decomposition for the two most represented educational degrees in the top one percent, medical doctors and lawyers. Whereas the glass ceiling coefficient is small for medical doctors, it is much larger for lawyers.

A Note: The Effect of Assortative Mating on Income Inequality I provide a theoretical upper bound on the effect of assortative mating on income inequality by comparing perfect assortative mating with random mating. The percentage drop in the Gini coefficient from perfect assortative to random mating is bounded by 1−   ≈ 29%. Furthermore, I compare the Gini coefficient of the income distribution of actual households with the Gini coefficient under random mating using US census data. Under all specifications, the effect of randomization on the Gini coefficient is never larger than 0.015. 

Climate Policies and Input Substitution over Time

This paper investigates quantitatively how the impact of climate policies such as a carbon tax differs over the short and long run in the macroeconomy. We document limited possibilities to switch from fossil fuels to green alternatives over short time horizons. Over more extended periods, however, this substitutability increases significantly. The same pattern holds for aggregate energy in production. We then build a quantitative growth model that accounts for these patterns through a technology-choice channel. We find that, in order to achieve similar long-run emission targets, carbon taxes should be increased by about 10% permanently compared to models that focus on the long run only.

Electrification of U.S. Aggregate Production: Theory and Evidence

In this paper, I scrutinize the process of electrification, defined as an increase in the share of electricity in the energy bundle. I first document trends and facts regarding the use of fossil fuels and electricity as end-use energy types in production in the U.S. I provide evidence that these two energy types are strong complements in the short- but more substitutable in the long run. In particular, I estimate the short-run elasticity of substitution between these two energy inputs to be 0.06 and argue for a Cobb-Douglas relationship and, thus, a unitary elasticity of substitution in the long run. I then build a model that can quantitatively reproduce these facts through a directed technological change mechanism. Crucially, the main driver of electrification is the relative improvement of fossil fuel use efficiency vis-à-vis electricity's.

(Be-)Coming Clean: A Model of the U.S. Energy Transition

This paper develops a quantitative framework of the energy transition and shows how the decarbonization of the economy hinges on three main mechanisms endogenous to the model: (i) developments in energy efficiency determining energy use in a growing economy; (ii) electrification of the production process driven by directed technical change; and (iii) capacity building for green electricity production. I then use the model to evaluate a net zero by 2050-policy vis-à-vis business as usual. I find that the energy transition happens in a laissez-faire scenario but has to be sped up if the policy target is to be fulfilled. In particular, I find that the required carbon tax is initially around $250 per ton CO2, and output and consumption growth are transitionally 0.2-0.3 percentage points lower under environmental policy.

Green Subsidies, the Energy Transition, and Implications of the Inflation Reduction Act

This paper studies the implications of green subsidies on the economy and the energy transition. I include a technology and a learning-by-doing (LBD) externality in Chapter 3’s framework. The internalization of these inefficiencies requires green subsidies, which have important implications for the energy transition. In particular, fossil fuel use in the economy will reduce by 38% by the end of the 2060s compared to laissez-faire. Additionally, the two externalities interact. Internalizing the LBD mechanism reduces the technology externality, while internalizing the technology shift exacerbates the implications of unaccounted-for LBD. Investigating the IRA shows that it is leveraging the right externality with an imperfect instrument: ITCs do not perfectly internalize the LBD externality and lead to fossil fuel use rebounding after their expiration.

Declining Hours Worked Among Entrepreneurs

In this paper, I show that over the past 35 years, hours worked by entrepreneurs have fallen substantially: by five hours per week more than for workers. This decline accounts for the bulk of the fall in total hours worked and is present in all available subgroups (gender, age, education, number of children, occupation, and industry). It is robust to adjusting for compositional effects and occurs without noticeable changes in the relative hourly income of entrepreneurs. The decline originates from the top of the hours distribution: the share of entrepreneurs working more than 45 hours has dropped significantly. I interpret these facts using a Roy model of occupational choice, augmented with an intensive labor supply margin. The model allows the marginal return of working an additional hour to depend on the level of hours. I estimate the model at two points in time and find that a fall in the relative marginal return at higher hours worked is key for explaining the drop in hours and the drop in the share of entrepreneurs. I show that changes in the market structure of the goods or services that entrepreneurs sell can account for this.

 A Nonhomothetic Price Index and Cost-of-Living Inequality

We derive a nonhomothetic generalization of all superlative price indices and document cost-of-living inequality in the United States. When necessities and luxuries are separable in the expenditure function, this generalization eliminates the need to estimate a complete demand model. Using CEX-CPI data from 1995 to 2020, we find no differences in average inflation rates across the expenditure distribution, but 2.5 times higher inflation volatility for the bottom decile than the top decile, stemming from a larger exposure to food, gasoline, and utilities. Our analysis challenges inequality measurements using group-specific homothetic price indices and suggests an income-effect bias in these estimations.

A Distributional PCE Price Index From Aggregate Data

This paper proposes a method to measure individual and aggregate changes in the cost of living when consumer behavior is nonhomothetic and microdata on consumption expenditures are not available. Aggregate prices and expenditure shares together with a single cross-sectional distribution of expenditures are sufficient to create a distribution of nonhomothetic cost-of-living indices with this approach. The cost-of-living indices derive from PIGL preferences, generalize the Törnqvist price index, and only contain one unknown parameter. Because PIGL preferences aggregate consistently, this parameter can be identified from aggregate data. Using US Personal Consumption Expenditure (PCE) data, we apply the method to obtain a nonhomothetic PCE price index covering 71 product groups for the period 1959 to 2023. This index reveals a 0.39 percentage point gap in average annual inflation rates between the poorest and richest ten percent since 1959 and a 1.9 percentage point gap throughout 2022, thus suggesting that poorer households are hit harder both in the long run and in the recent inflation surge.

"Taxation, Career Concerns and CEO Pay". This paper proposes a simple dynamic model of equilibrium CEO compensation. Motivated by the strengthened career incentives stemming from the fall in the top income tax rates over the past decades, I study the implications of a model where the quality of talent identification depends on how hard individuals work in order to be among the winners in the contest for managerial positions. It is shown how the compensation of CEOs can be interpreted in this light, across time, across industries, and across countries, and I provide some evidence showing that the predictions of the model are in line with several empirical developments over the past decades.

"Incentives under Communism: The Value of Low-Quality Goods". In this paper, I study how efficiently centrally planned regimes can provide incentives across different stages of economic development. In particular, I study the attractiveness of an incentive system based on exclusive provision of high-quality goods to high-ranked members of society. At low levels of economic development, a self-interested regime can exploit such an incentive system to reduce the cost of providing incentives. However, such an incentive system generally loses its attractiveness as the economy grows. The economic performance of the centrally planned economies is then analyzed in light of this result.

"The Business of Troubled Autocrats". Many autocrats control resource rents. Typically, they rely on these rents in order to buy political support. In this paper, I study how such autocrats behave in product and capital markets, in particular at times of financial distress. The main questions are: How does the asset position of an autocrat affect his behavior as a producer in a market with rents? From whom does the autocrat obtain financing in order to get out of difficulties? I show that when the asset position of the autocrat drops below a certain threshold, output drops below the level of a standard monopolist. Further, the autocrat can obtain less expensive financing domestically by exploiting the presence of vested interests, implying that there is zero foreign debt in equilibrium.

Organizational Change and Productivity Growth − Evidence from Sweden

This paper uses two different firm level surveys matched with employer-employee data to investigate both determinants and effects of different types of organizational change. The results support the competition hypothesis for inducing organizational change. Among the four measures of organizational change investigated in this paper, only delayering shows significant effects on subsequent productivity growth.

Firms and Skills: The Evolution of Worker Sorting

We document a significant increase in sorting by both cognitive and non-cognitive skill from 1986 to 2008 using data for 28 cohorts of Swedish men. The skill differences within firms have fallen in all major industries while differences in skill between firms have increased. Two main factors drive the increase in sorting. First, workers in high-skilled occupations, such as engineers, have moved to the IT and telecom industries. Second, assortative matching of workers by skill has become more positive.

Trading Off or Having it All? Completed Fertility and Mid-career Earnings of Swedish Men and Women

Earnings in mid-career and children are two fundamental outcomes of the life-choices of men and women. This paper explores how these outcomes have changed for Swedish men and women born 1945−1962 by documenting changes in education, assortative mating patterns, completed fertility and mid-career earnings and also how the association between children and earnings has changed over time.

Solving the Puzzle − Hours Constraints, Technical Change and Female Labor Supply

This paper extends the standard theory of labor supply to incorporate an important ingredient in the labor supply decision of today's women: the role of flexibility and time constraints. Using a life-cycle model, I formalize the notion that as technology allows jobs to become more flexible, time constrained individuals can supply more hours and may therefore find it attractive to opt for a more demanding career.

This thesis consists of three self-contained essays in economics.

Property Rights, Resources, and Wealth: Evidence from a land reform in the United States: This paper compares the effectiveness of two alternative property rights regimes to overcome the Tragedy of the Commons. One regime is to distribute access rights under public ownership, as proposed by Samuelson, the other is to sell land to generate private ownership as proposed by Coase. However, as property rights are not randomly allocated, causal evidence on the relative effectiveness of these two regimes is scarce. I exploit a spatial discontinuity generated by the 1934 Taylor Grazing Act, which created 20,000 miles of plausibly exogenous boundaries that separated publicly owned rangeland from open-access rangeland. I combine these boundaries with data on the timing of private-property sales to jointly estimate the effects of public and private ownership on resource exploitation and income in a spatial regression discontinuity design. Using satellite-based vegetation data, I find that both property rights regimes increased vegetation by about 10%, relative to the open-access control. Census-block-level income data reveals that public ownership raised private household income by 13% and decreased poverty rates by 18%. To study mechanisms, I exploit variation in pre-reform police presence and panel data on farm values, and show that legal enforcement through police presence is a necessary condition for the positive and long-lasting effects of both regimes to arise.

State Repression, Exit, and Voice: Living in the Shadow of Cambodia’s Killing Fields: This paper asks whether state repression is an effective strategy for silencing dissent and changing political beliefs. We use evidence from history’s most severe episode of state-led repression, the genocide in Cambodia under the Khmer Rouge, to estimate the effects of political violence on political behavior four decades later. To establish causality, we rely on the Khmer Rouge’s desire to create an agrarian society, moving forced labor to areas experiencing higher agricultural productivity. Using historic rainfall to generate exogenous variation in productivity shows that more people died in productive communes. Higher productivity under the Khmer Rouge leads to more votes in favor of the opposition over the authoritarian incumbent and increased support for democratic principles. At the same time, citizens become more cautious in their interactions with the local community as captured by lower participation in community organizations and less trust. Our results suggest that state repression makes people more convinced about the need for opposing views but more careful in expressing them, making politics less personal and more competitive.

The Effects of Migration and Ethnicity on African Economic Development: Migration between countries has been shown to have positive effects on economic outcomes such as trade by fostering economic and cultural integration. In Africa, where ethnic identification is reasonably strong, omitting ethnic links between countries likely introduces a considerable bias in the estimates. Following the literature, I use past migrant clusters as instruments to show that migration in 1990 led to more bilateral exports for neighboring countries in the period 1989-2014. To account for the ethnic heterogeneity of African countries, I generalize this approach and use pre-colonial ethnic linkages between of home- and foreign-countries as an instrument for migration. The results suggest a downward bias when not accounting for ethnic heterogeneity. I discuss potential concerns of pre-colonial ethnic linkages and find no evidence of omitted variable biases caused by similar languages, preferences, or conflict. Ethnic connections instead facilitate trade, especially for groups that are excluded from government coalitions. The results are consistent with a model of international trade where cross border connections decrease the fixed costs of exporting.

Complementary Roles of Connections and Performance in Political Selection in China

Who becomes a top politician in China? We focus on provincial leaders and examine how their chance of being promoted depends on performance and connections with top politicians. We find a positive correlation between promotion and growth that is robustly stronger for connected provincial leaders than for unconnected ones.

Pollution for Promotion

This paper provides evidence on the impact of political incentives on the environment using the case of China's pollution. Guided by a simple career concerns model with the choice of dirty and clean technologies, I examine empirically how promotion incentives of provincial governors affect pollution and find that stronger career concerns increase pollution.

Decentralization, Collusion and Coalmine Deaths

This paper investigates how collusion between regulators and firms affects workplace safety using the case of China's coalmine deaths. We find that decentralization increases coalmine death because collusion is easier under decentralization. We also find that this increase in mortality is larger for the regulators with lower transaction costs.

The Legacies of Forced Freedom: China's Treaty Ports

This paper investigates the long-run development of China's treaty ports from the mid-18th century until today. I document the dynamic development paths of treaty ports and their neighbours in alternate phases of closedness and openness. I also provide suggestive evidence to understand the advantage of treaty ports in the long run.

Weather Shocks, Sweet Potatoes and Peasant Revolts in Historical China

I use data covering 267 prefectures over four centuries to investigate how weather shocks and the introduction of a drought-resistant crop affected peasant revolts. I find that droughts increased the likelihood of peasant revolts and the effect of droughts got mitigated by the adoption of sweet potatoes.

Exit, Voice and Political Change: Evidence from Swedish Mass Migration to the United States. During the Age of Mass Migration, 30 million Europeans immigrated to the United States. We study the long-term political effects of this large-scale migration episode on origin communities using detailed historical data from Sweden. To instrument for emigration, we exploit severe local frost shocks that sparked an initial wave of emigration, interacted with within-country travel costs. Because Swedish emigration was highly path dependent, the initial shocks strongly predict total emigration over 50 years. Our estimates show that emigration substantially increased membership in local labor organizations, the strongest political opposition groups at the time. Furthermore, emigration caused greater strike participation, and mobilized voter turnout and support for left-wing parties in national elections. Emigration also had formal political effects, as measured by welfare expenditures and adoption of inclusive political institutions. Together, our findings indicate that large-scale emigration can achieve long-lasting effects on the political equilibrium in origin communities.

Mass Migration and Technological Innovation at the Origin. This essay studies the effects of migration on technological innovations in origin communities. Using historical data from Sweden, we find that large-scale emigration caused a long-run increase in patent innovations in origin municipalities. Our IV estimate shows that a ten percent increase in emigration entails a 7 percent increase in a muncipality’s number of patents. Weighting patents by a measure of their economic value, the positive effects are further increased. Discussing possible mechanisms, we suggest that low skilled labor scarcity may be an explanation for these results. 

Richer (and Holier) Than Thou? The Impact of Relative Income Improvements on Demand for Redistribution. We use a tailor-made survey on a Swedish sample to investigate how individuals' relative income affects their demand for redistribution. We first document that a majority misperceive their position in the income distribution and believe that they are poorer, relative to others, than they actually are. We then inform a subsample about their true relative income, and find that individuals who are richer than they initially thought demand less redistribution. This result is driven by individuals with prior right-of-center political preferences who view taxes as distortive and believe that effort, rather than luck, drives individual economic success.

Wealth, home ownership and mobility. Rent controls on housing have long been thought to reduce labor mobility and allocative efficiency. We study a policy that allowed renters to purchase their rent-controlled apartments at below market prices, and examine the effects of home ownership and wealth on mobility. Treated individuals have a substantially higher likelihood of moving to a new home in a given year. The effect corresponds to a 30 percent increase from the control group mean. The size of the wealth shock predicts lower mobility, while the positive average effect can be explained by tenants switching from the previous rent-controlled system to market-priced condominiums. By contrast, we do not find that the increase in residential mobility leads to a greater probability of moving to a new place of work.

Costly reversals of bad policies: the case of the mortgage interest deduction

This paper measures the welfare effects of removing the mortgage interest deduction under a variety of implementation scenarios. To this end, we build a life-cycle model with heterogeneous households calibrated to the U.S. economy, which features long-term mortgages and costly refinancing. In line with previous research we find that most households would prefer to be born into an economy without the deductibility. However, when we incorporate transitional dynamics less than forty percent of households are in favor of a reform and the average welfare effect is negative. This result holds under a number of removal designs.

Mortgage lending standards: implications for consumption dynamics

In this paper, we investigate to what extent stricter mortgage lending standards affect households' ability to smooth consumption. Using a heterogeneous-household model with incomplete markets, we find that a permanently lower loan-to-value (LTV) or payment-to-income (PTI) requirement only marginally affects the aggregate consumption response to a negative wealth shock. We show that even the distribution of marginal propensities to consume across households is remarkably insensitive to these permanent policies. In contrast, households’ consumption responses can be reduced if a temporary stricter LTV or PTI requirement is implemented prior to a negative wealth shock. However, strong assumptions need to be made for temporary policies to be welfare improving.

The great house price divergence:  a quantitative investigation of house price fundamentals

What explains the widening gap in house prices between U.S. metropolitan areas? In this paper, I build a two-region Rosen-Roback model with heterogeneous households, mortgage borrowing constraints, and housing markets to answer this question. I find that changes in regional productivity and the real interest rate explain 86% of the observed increase in dispersion of prices across metropolitan areas and 66% of the increase in the national house price index since 1995. Endogenous migration and location-varying land rents are key for these findings. When decomposing the results, both wages and the real rate contribute substantially to both the change in the level and dispersion of house prices. Turning to dynamics, prices are quick to adjust to changes in house price fundamentals, whereas migration is slow. This rapid change in prices leads to significant wealth and welfare gains among homeowners in expensive locations.

Household Debt and Monetary Policy: Revealing the Cash-Flow Channel We examine the effect of monetary policy on spending when households hold debt linked to short-term rates, such as adjustable-rate mortgages (ARMs). Using registry-based data, which is broadly representative of Swedish households, we find substantial heterogeneity in consumption responses to changes in monetary policy. We find that consumption responds more strongly to changes in interest rates for households with high debt than for households with little or no debt. Moreover, households with ARMs appear to be more interest-rate sensitive than households with fixed-rate mortgages. Our results are consistent with hand-to-mouth behavior and an important transmission of monetary policy through the cash-flow channel.

Should I Stay or Must I Go? Temporary Refugee Protection and Labor-Market Outcomes We study a Danish reform in 2002 that lowered the ex-ante probability of refugees receiving permanent residency by prolonging the time period before they were eligible to apply for such residency. Adherence to the new rules was entirely determined by the date of the asylum application and the reform was implemented retroactively. We formulate a simple search and matching model to derive predictions that can be tested using our data. Using registry based data on individuals in Denmark, we then study the effects on educational and labor-market outcomes and find that the reform significantly increased the enrollment in formal education, especially for females and low-skilled individuals. In terms of employment and earnings, the coefficients are in general negative but insignificant. Other outcomes of interest are also studied.

Risk-sharing and Entrepreneurship We study the role of risk-sharing in facilitating innovation. Studying entrepreneurship and innovation entails modelling an occupational choice and an effort choice. Risk-sharing may increase the number of individuals who become entrepreneurs by limiting the downside risk. The effort of entrepreneurs may, however, be hampered by high risk-sharing if this limits the returns faced by successful entrepreneurs relative to unsuccessful entrepreneurs. We construct a theoretical model where risk-sharing may be private or public, i.e., provided through the welfare state by means of taxation. We show that the level of risk-sharing matters for the characteristics of entrepreneurs. Moreover, high taxes, which imply high equilibrium benefits paid out to entrepreneurs, encourage entrepreneurship but discourage effort.

Portfolio and Housing Decisions in the Presence of Intergenerational Links There is ample support for the idea that parents matter for the housing market choices of their children. Despite this, our understanding of the effects of these intergenerational links remains limited. I set up a partial equilibrium overlapping generations model with intergenerational links and study housing and portfolio decisions. I use the model to characterize individual behavior, as well as behavioral responses to a change in borrowing conditions. In steady state, the main determinant of both children's and parents' behavior is parental wealth and stricter borrowing conditions have a limited effect. During a transition with positive house price growth, however, the difference between parents who are homeowners and renters (and between their children) is amplified and stricter borrowing conditions have a stronger impact on behavior.

Costly reversals of bad policies: the case of the mortgage interest deduction

This paper measures the welfare effects of removing the mortgage interest deduction under a variety of implementation scenarios. To this end, we build a life-cycle model with heterogeneous households calibrated to the U.S. economy, which features long-term mortgages and costly refinancing. In line with previous research, we find that most households would prefer to be born into an economy without the deductibility. However, when we incorporate transitional dynamics, less than forty percent of households are in favor of a reform and the average welfare effect is negative. This result holds under a number of removal designs.

Monetary policy and the mortgage market

This paper quantifies the role of changes in mortgage interest rates and house prices in the transmission of monetary policy. I build a heterogeneous-agent life-cycle model with housing and long-term mortgage contracts. The illiquid nature of housing gives rise to wealthy hand-to-mouth households, and the existence of mortgage financing allows for households to be both relatively poor and have high exposures to changes in the interest rate. I find that the aggregate response of consumption to a real interest rate shock is highly dependent on the type of mortgage contracts available and the possibility to refinance. In an economy with adjustable-rate mortgages, the consumption response is more than six times as large as compared to when fixed-rate mortgages are used. Hence, a detailed understanding of the contract structures in the mortgage market is an important input into the analysis of monetary policy.

Mortgage lending standards: implications for consumption dynamics

In this paper, we investigate to what extent stricter mortgage lending standards affect households' ability to smooth consumption. Using a heterogeneous-household model with incomplete markets, we find that a permanently lower loan-to-value (LTV) or payment-to-income (PTI) requirement only marginally affects the aggregate consumption response to a negative wealth shock. We show that even the distribution of marginal propensities to consume across households is remarkably insensitive to these permanent policies. In contrast, households’ consumption responses can be reduced if a temporary stricter LTV or PTI requirement is implemented prior to a negative wealth shock. However, strong assumptions need to be made for temporary policies to be welfare improving.

Inertia of dominated pension investments: evidence from an information intervention

The market for long-term savings in mutual funds is characterized by high price dispersion between similar funds. In this paper, we conduct an empirical investigation into possible causes of imperfect competition in this market. We discriminate between three main hypotheses on the demand side: a lack of awareness of price dispersion, search costs, and financial illiteracy. We run a large-scale field experiment in the Swedish public pension system, where information letters are sent to savers in two dominated index funds. We show that an information intervention that increases the awareness of a cheaper, dominating fund, at the same time as it reduces the search costs for finding such an alternative, can significantly improve households' real investment allocations. Nonetheless, a majority of savers who are sent information about the name of the dominating fund do not switch funds. Thus, the high degree of inertia in pension investments remains even when search frictions for identifying dominating alternatives are eliminated.

Land Ownership and Development: Evidence from Postwar Japan

This paper analyzes the effect of land ownership on technology adoption and structural transformation. A large-scale land reform in postwar Japan enforced a large number of tenant farmers who were cultivating land to become owners of this land. I find that the municipalities which had many owner farmers after the land reform tended to experience a quick entry of new agricultural machines which became available after the reform. The adoption of the machines reduced the dependence on family labor, and led to a reallocation of labor from agriculture to industries and service sectors in urban centers when these sectors were growing. I also analyze the aggregate impact of labor reallocation on economic growth by using a simple growth model and micro data. I find that it increased GDP by about 12 percent of the GDP in 1974 during 1955-74. I also find a large and positive effect on agricultural productivity.

Loyalty and Treason: Theory and Evidence from Japan's Land Reform

A historically large-scale land reform in Japan after World War II enforced by the occupation forces redistributed a large area of farmlands to tenant farmers. The reform demolished hierarchical structures by weakening landlords' power in villages and towns. This paper investigates how the change in the social and economic structure of small communities affects electoral outcomes in the presence of clientelism. I find that there was a considerable decrease in the vote share of conservative parties in highly affected areas after the reform. I find the supporting evidence that the effect was driven by the fact that the tenant farmers who had obtained land exited from the long-term tenancy contract and became independent landowners. The effect was relatively persistent. Finally, I also find the surprising result that there was a decrease, rather than an increase, in turnout in these areas after the reform. 

Geography and State Fragmentation

We examine how geography affects the location of borders between sovereign states in Europe and surrounding areas from 1500 until today at the grid-cell level. This is motivated by an observation that the richest places in this region also have the highest historical border presence, suggesting a hitherto unexplored link between geography and modern development, working through state fragmentation. The raw correlations show that borders tend to be located on mountains, by rivers, closer to coasts, and in areas suitable for rainfed, but not irrigated, agriculture. Many of these patterns also hold with rigorous spatial controls. For example, cells with more rivers and more rugged terrain than their neighboring cells have higher border densities. However, the fragmenting effects of suitability for rainfed agriculture are reversed with such neighbor controls. Moreover, we find that borders are less likely to survive over time when they separate large states from small, but this size-difference effect is mitigated by, e.g., rugged terrain.

Recent changes in firm dynamics and the nature of economic growth

In line with the US economy, market concentration and dispersion of revenue productivity within industries increased in Sweden from 1997-2017. I document a novel finding in administrative data that provides important insights about the trends: firm size and revenue productivity growth accelerated starting in the 1990s. I reconcile these trends in a dynamic framework. Firms grow in size by expanding into new product markets and increase markups by distancing competitors within their product markets through R&D. The model rationalizes the empirical trends by reducing the R&D cost of distancing competitors and raising the cost of entering new product markets. I estimate that the changes in R&D costs increase long-run growth by 0.5 pp per year, whereas they have a negative effect on the output level through a reduction in allocative efficiency. Lastly, I study the effect of different R&D policies on economic growth. A patent waiver, recently discussed for Covid vaccines, lowers the aggregate growth rate, despite improving static efficiency.

Micro PPI-based real output forensics

We analyze producer price index micro data on total private goods and services production in Sweden to quantify the implications of methods of price index construction on the measured aggregate inflation rate. We document large quantitative effects of different methods of lower-level aggregation, i.e., the aggregation of price changes of different products into an index at the 5-digit product group level. Moving from an arithmetic index to geometric averaging across items decreases annual goods and services inflation by 0.5 and 0.4 percentage points, respectively. We contrast the results of these statistical indices with an economic theory-based index relying on a nested-CES structure. Estimating elasticities of substitution across goods within industries implies that such a theory-based index results in an annual inflation rate that is 3.9 and 3.1 percentage points lower for goods and services, respectively. Our results pose a challenge for the comparability of inflation rates and real output growth rates across countries as well as a tension between (economic) theory and (statistical) measurement. Therefore, we recommend that statistical offices report three moments for each product group instead of the published single index number. This would allow users to approximate any nested-CES index under the assumption of a joint log-normal distribution of price growth factors and weights.

Preference heterogeneity and portfolio choices over the wealth distribution

What are the key elements required to generate portfolio choices over the wealth distribution in line with the data? In this paper, we argue that capturing preference heterogeneity across individuals is one of them. Using a partial equilibrium Bewley-type model with endogenous portfolio choice and cyclical skewness in labor income shocks, we show that heterogeneity in risk aversion, impatience and portfolio diversification is crucial to match the empirical schedules of unconditional risky share, participation and share of idiosyncratic variance in individual portfolios. At the same time, these elements generate dispersion in wealth through their heterogeneous effects on individuals' investment decisions resulting in a cross-sectional wealth distribution that provides a close fit of the data, particularly at the very top.

Costly reversals of bad policies: the case of the mortgage interest deduction This paper measures the welfare effects of removing the mortgage interest deduction under a variety of implementation scenarios. To this end, we build a life-cycle model with heterogeneous households calibrated to the U.S. economy, which features long-term mortgages and costly refinancing. In line with previous research, we find that most households would prefer to be born into an economy without the deductibility. However, when we incorporate transitional dynamics, less than forty percent of households are in favor of a reform and the average welfare effect is negative. This result holds under a number of removal designs.

Optimal property taxation How high should residential property taxes be? In this paper, I quantify the optimal property tax rate and how it interacts with a tax on capital income. For this purpose, I employ a general equilibrium life-cycle model with overlapping generations and incomplete markets calibrated to the U.S. economy. I find that the optimal property tax for newborns in the long run is considerably higher than its current level of one percent. In the benchmark model, the optimal property tax is about five times higher than today, and the corresponding capital income tax is reduced from 36 percent to close to zero. For current generations, however, the optimal policy is to keep the tax rates close to today’s levels. They would incur substantial welfare losses on average from an implementation of the long-run optimal policy.

Mortgage lending standards: implications for consumption dynamics In this paper, we investigate to what extent stricter mortgage lending standards affect households' ability to smooth consumption. Using a heterogeneous-household model with incomplete markets, we find that a permanently lower loan-to-value (LTV) or payment-to-income (PTI) requirement only marginally affects the aggregate consumption response to a negative wealth shock. We show that even the distribution of marginal propensities to consume across households is remarkably insensitive to these permanent policies. In contrast, households’ consumption responses can be reduced if a temporary stricter LTV or PTI requirement is implemented prior to a negative wealth shock. However, strong assumptions need to be made for temporary policies to be welfare improving.

The Cyclicality of Earnings Growth Along the Distribution - Causes and Consequences

Earnings growth is more procyclical at the bottom of the income distribution than at the top. Using high-quality administrative data from Germany, I show that the heterogeneity is chiefly driven by transitions between employment and non-employment, specifically job-finding. I build a heterogeneous agent business cycle model that can rationalize these empirical findings. Agents in the model endogenously choose where to search for work in a labor market that features directed search. The model reproduces the heterogeneous procyclicality of earnings growth, as well as the contribution of job-finding, along the income distribution. I use this model to evaluate two policies aimed at reducing business cycle risk: countercyclical hiring subsidies and Universal Basic Income (UBI). The first policy proposal increases welfare relative to the baseline economy. Implementing UBI decreases the volatility of aggregate consumption but decreases welfare overall.

Monetary Policy and Liquidity Constraints: Evidence from the Euro Area

We quantify the relationship between the response of output to monetary policy shocks and the share of liquidity constrained households. We do so in the context of the euro area using a Local Projections Instrumental Variables estimation. We construct an instrument for changes in interest rates from changes in overnight indexed swap rates in a narrow time window around ECB announcements. Monetary policy shocks have heterogeneous effects on output across countries. Using micro data, we show that the elasticity of output to monetary policy is larger in countries that have a larger fraction of households that are liquidity constrained.

The Curious Incidence of Monetary Policy Across the Income Distribution

We use high-frequency administrative data from Germany to study the effects of monetary policy on incomes and employment prospects across the earnings distribution. Earnings growth at the bottom of the distribution is substantially more elastic to policy shocks. The unequal incidence is driven by differences in employment risk across the distribution - lower-earning households experience higher employment risk in response to contractionary shocks. Our empirical estimates imply significant amplification of the aggregate consumption response to shocks to future consumption and interest rates.

It Runs in the Family: Occupational Choice and the Allocation of Talent

Children frequently grow up to work in the same jobs as their parents. Using unique data on worker skills and personality traits, and administrative data on the labor market outcomes of Swedish men, we study occupational choice and its impact on the allocation of talent. We document that sons are disproportionately more likely to follow into the same occupation as their fathers, across all levels of skills and earnings. We estimate a general equilibrium Roy model with costly occupational choice and heterogeneous entry barriers depending on parental background. We find that these entry barriers lead to substantial misallocation. Equalizing entry costs across workers leads occupational following to fall by half. However, this reallocation of workers increases intergenerational mobility and aggregate income only modestly, because sons move to occupations that are similar to those of their fathers in income and skill requirements. Our findings are consistent with intergenerational persistence in occupations and incomes reflecting transmission of skills and sorting on comparative advantage.

Manufacturing Revolutions - Industrial Policy and Networks in South Korea. This chapter uses a historic big push intervention and newly digitized data from South Korea to study the effects of industrial policy on industrial development. In 1973 South Korea transitioned to a military dictatorship and drastically changed their development strategy. I find industries targeted by the regime's big push grew significantly more than non-targeted industries along several key dimensions of industrial development. These developmental effects persisted after industrial policies were retrenched, following the 1979 assassination of the president. Furthermore, I estimate the spillovers of the industrial policies using exogenous variation in the exposure to the policy across the input-output network. I find evidence of persistent pecuniary externalities like those posited by big push development theorists, such as Albert Hirschman. In other words, I find that South Korea's controversial industrial policy was successful in producing industrial development, the benefits of which persisted through time and in industries not directly targeted by the policies.

Waiting for the Great Leap Forward - The Green Revolution and Structural Change in the Philippines. This study explores the short- and long-run impacts of the green revolution on structural transformation. The setting is the revolution’s home country: the Philippines. In 1966, the Philippine’s experienced the widespread introduction of so-called “miracle rice” varieties, invented at the International Rice Research Institute in Los Banos, Laguna. The island republic experienced large gains to agricultural productivity as a result. Using a newly constructed panel of Philippine municipalities, I show that growth in agricultural productivity led to unexpected patterns of structural transformation. In the short-run, the green revolution translated into labor-absorbing technological change, reallocating labor into HYV-intensive rice economies. However, in the long-run, the rising relative cost of labor, meant that rice farms mechanized and displaced the Philippine peasantry into the service sector.

The Historical State, Local Collective Action, and Economic Development in Vietnam. This study examines how the historical state conditions long-run development, using Vietnam as a laboratory. Northern Vietnam (Dai Viet) was ruled by a strong centralized state in which the village was the fundamental administrative unit. Southern Vietnam was a peripheral tributary of the Khmer (Cambodian) Empire, which followed a patron-client model with weaker, more personalized power relations and no village intermediation. Using a regression discontinuity design across the Dai Viet-Khmer boundary, the study shows that areas historically under a strong state have higher living standards today and better economic outcomes over the past 150 years. Rich historical data document that in villages with a strong historical state, citizens have been better able to organize for public goods and redistribution through civil society and local government. This suggests that the strong historical state crowded in village-level collective action and that these norms persisted long after the original state disappeared.

This thesis consists of three essays in Political Economy:

“China’s Political Business Cycle” uncovers the fact that the timing of China’s business cycle correlates to the timing of the Communist Party’s Congress and constructs a theory to explain the mechanism of the political business cycle. An empirical test of the theory derives a result consistent with the predictions of the theory.

“A Theory of Dynastic Cycle” provides a politico-economic theory to explain the mechanism of the dynastic cycle, a repeating pattern in China’s theory. The core of the theory is the ruler’s trade-off between the political account and the economic account in choosing a successor.

“A Politico-Economic Theory of Corruption in Non-Democracy” investigates the ruler’s incentive to have corrupt agents. The key point is that a corrupt agent has a bad reputation and is less likely to replace the incumbent ruler. The major implication is that unless there is fundamental institutional change, it is hard to eradicate corruption in non-democracy.

In the first essay, Persistence in Swedish Unemployment Rates, we study if there is no or weak tendency in unemployment rates to revert back to previous levels. Persistence is caused by: natural rate shocks, long unemployment cycles, and spill-over from cyclical to permanent unemployment. We find evidence of high persistence. The results suggest that the quick rise of unemployment rates during 1992-1994 was caused by large permanent and cyclical shocks in combination with spill-over effects.

In the second essay, The Equilibrium Rate of Unemployment in a Small Open Economy, we challenge the common and simplifying assumption that the economy is closed. We set up and estimate a structural unobserved components open economy model for the unemployment rate and the real exchange rate. Our estimates indicate that the foreign sector is of substantial importance when explaining movements in the NAIRU.

In the third essay, A Simultaneous Model of the Swedish Krona, the US Dollar and the Euro, we simultaneously estimate the real exchange rates between the Swedish Krona, the US Dollar and the Euro. The exchange rate movements are well explained by potential output, the output gap, terms of trade, the fraction of prime-aged people in the population, and structural government budget deficits. The models work well in an out of sample exercise.

In the last essay, Wages, Employment, and Unemployment: The Effect of Benefits, Taxes and Labor Mobility, we study how wages and employment are affected by unemployment insurance and labor mobility. We show that the wage effect of higher unemployment benefits can be either positive or negative, depending on the specification of union utility function and the taxation scheme for financing the benefits. The common claim that wages are lower when a sector bears a higher fraction of unemployment costs does not hold in general. We also show that labor mobility across sectors and increased competition reduces wages and unemployment.

Infertility Risk and Child Marriage

The high infertility rates observed in some developing countries may have broad societal impacts, for example by people marrying and having children at a young age to increase their chances of reaching their fertility target. I study the link between infertility risk and marriage timing using data from Madagascar. Specifically, I focus on how infertility risk affects the probability of child marriage, a practice associated with adverse outcomes for young brides and their children. I use spatial variation in exposure to the parasite schistosomiasis. The empirical strategy compares two strains of this parasite, similar in their transmission mechanisms and health impacts, except that one of the two strains causes infertility. In my data, exposure to this strain increases the probability that a woman is infertile by 40%. I find that exposure to the infertility-causing strain increases the probability of child marriage and early fertility by 22%.

Maternal Health and Labor Market Outcomes

We study how severe injuries related to childbirth affect mothers' labor market outcomes. 1 in 20 first-time mothers who have a vaginal delivery suffer a severe birth tear, which can have long-lasting adverse impacts on their health and quality of life. Using a difference-in-differences design with a matched control group, we find that severe birth tears lead to a 6% higher earnings loss in the first five years after childbirth compared to the control group. The effect is larger for mothers from low SES backgrounds, while high SES mothers are found to seek more healthcare following their injury.

Alcohol Availability, Prenatal Conditions and Midlife Mental Health

 We examine the long-term mental health effects of an 8.5-month policy experiment that led to a sharp and unexpected increase in alcohol availability, focusing on individuals exposed to the policy in utero. We use administrative healthcare and drug prescription records to identify individuals who have received treatment for a mental health disorder. Prenatal exposure to the policy had a large and persistent effect on mental health: the exposed cohort is 16% more likely to be treated for a mental disorder in midlife. The effect is largest for those exposed from the second trimester and is only partly explained by the lower earnings observed among exposed individuals.

The Value of Monitoring for Disaster Prevention: The Desert Locust

Monitoring systems are meant to detect early signs of potentially disastrous outbreaks of diseases and pests, in time for preventative action. These monitoring systems are costly, and identifying their economic value requires estimating damages from outbreaks in empirical settings where monitoring is neither uniform nor exogenous. We estimate the value of monitoring systems for desert locusts, known to devour entire agricultural fields. We leverage conflict and weather events in breeding areas to detect the effects of monitoring interruptions on swarm outbreaks. We then reconstruct the spatial patterns of locust migrations to propagate these effects on swarm outbreaks beyond breeding areas. Finally, we show that in-utero exposure to a swarm increases the probability of stunting by 16%. These estimates allow us to quantify the effects of a change in monitoring efforts on subsequent locust swarms and on human health.

Matching with the Right Attitude: the Effect of Matching Firms with Refugee Workers

We study the effect of contact in the workplace on firms' willingness to hire refugees and ultimately on refugees' labor market integration. We run an experiment in Uganda, where treated firms provide an internship of one week to a skilled refugee worker. We find that treated firms hire three times as many refugees than firms in the control group on the long run. Exposure to a refugee led firm managers to update their beliefs about refugees' skills in general. We find that positive matches, i.e., firms with a positive attitude toward refugees who were matched with a refugee with positive attitudes toward locals, resulted in a substantial increase in firms’ willingness to hire a refugee worker, while negative matches decrease firms’ willingness to hire. Our findings show that short-term exposure interventions can result in longer-term increases in employment for disadvantaged groups, but the size of this effect depends on the initial match quality.

Can work contact improve social cohesion between refugees and locals? Evidence from an experiment in Uganda

Does contact, through direct and indirect exposure in the workplace, promote social cohesion between refugees and natives? We answer to this question through an experiment with refugee and local workers in Uganda. We measure social cohesion through a compound measure incorporating attitudes, implicit and explicit biases and behaviors in real and hypothetical activities. We find that while implicit bias increases, explicit bias decreases for both groups, and behaviours towards the out-group are positive for both groups but differ slightly: natives want to have more refugee business partners and invest more in future businesses, while refugees want to work more for Ugandan firms and invest less in businesses of their own.

Do Information Frictions Kill Competition? A Field Experiment On Public Procurement in Uganda

We study whether information frictions deter firms from doing business with the government. We conduct two nation-wide randomized controlled trials (RCTs) in collaboration with the national anti-corruption and public procurement supervisory agency in Uganda. The first RCT aims to increase transparency, by providing firms with direct and timely access to information about government tenders over a two-year period. The second RCT additionally addresses mis-perceptions about the performance of government entities, by giving firms access to structured information on other firms' perceptions and on anti-corruption audits. We find that increasing transparency about tenders alone is not enough to increase firm participation in public procurement. However, additionally correcting firms' perceptions about the quality of public entities increases firms' total number of bids and total government contracts won. Overall, our findings point to the limits of transparency reforms that aim to increase competition in public procurement without accounting for firms' perceptions about government corruption and inefficiency.

Credit contracts, Business Development and Gender: Evidence from Uganda

We examine the effect of credit contract design on business growth. Entrepreneurs borrowing from one of Uganda's major lenders were randomly offered modified contracts with varying degrees of repayment schedule flexibility or an equivalent cash transfer. Our results indicate that enhanced flexibility in repayment schedules leads to higher profits 5 years later, with the optimal form of flexibility depending on the entrepreneur's gender. The cash transfer does not affect firm outcomes. Exploring the repayment flexibility effects, we find that male-owned businesses increase employee hiring and generate higher profit under flexible repayment contracts, whereas female-owned businesses benefit more from grace-period contracts. We present suggestive evidence that kinship taxation on female entrepreneurs drives these differences.

Screening Efficiency in Sickness Insurance: Evidence from a Spell Limit Reform

I estimate the effects of the removal of a limit on sick leave spells in the Swedish Sickness Insurance program, on labor market outcomes and sick leave. The removal of the spell limit led to longer sick leave spells. I also find that the removal led to a reduction in the share of people who are neither working, nor receiving sickness benefits. A conceptual framework is used to interpret the results in terms of benefits screening efficiency, which is found to increase through the removal of the spell limit. The identification is based on a regression discontinuity design, using the timing of sick leave start dates and the abolition of the spell limit.

Long-Term Effects of Cash Transfers: Evidence from a Swedish Reform

Do short-term cash transfers to the poor deliver long-term benefits? This paper studies a unique program introduced in Sweden in the 1930s. The program made large transfers – on average approximately 30 percent of total income in the collected sample – to widows with children. Income and family-size thresholds, combined with child age cutoffs, generate plausibly exogenous variation in program exposure. By digitizing and linking historical records to later administrative datasets, I study the long-term effects of this program. Focusing on life expectancy, I find no significant long-term effects; however, the estimates are imprecisely measured due to the limited sample size.

Inertia of Dominated Pension Investments: Evidence from an Information Intervention

In this paper we empirically investigate potential causes of imperfect competition in the fund market, as characterized by high price dispersion among comparable funds. We discriminate between three main hypotheses on the demand side: a lack of awareness of price dispersion, search costs, and financial illiteracy. A large-scale field experiment is conducted in the Swedish Premium Pension system. Information letters are sent to pension savers in two index funds, where there exists a cheaper fund with the same index strategy. We show that an information intervention that increases awareness of a cheaper, dominating fund, and reduces search costs to find such an alternative, can significantly improve households’ real investment allocations. Nonetheless, a vast majority of savers who are sent information about the name of the dominating fund do not switch funds. Thus, the high degree of inertia in pension investments remains even when search friction for identifying dominating alternatives are eliminated.

Midwives and Maternal Mortality: Evidence from a Midwifery Policy Experiment in 19th Century Sweden

This paper estimates the effect of a historical midwifery policy experiment on maternal mortality, infant mortality, and stillbirth during the period from 1830 to 1894 in Sweden. Exploiting sharp changes or “discontinuities” across time and place in the availability of trained and licensed midwives as an exogenous source of variation, we find that a doubling of trained midwives leads to a 20-40 percent reduction in maternal mortality and to a 20 percent increase in the uptake of midwife-assisted homebirths. The results thus suggest that a 1 percent increase in the share of midwife-assisted homebirths decreases maternal mortality by as much as 2 percent, which is a remarkable finding given that midwife training was only 6-12 months at that time. The results of this study contribute to the current debate about the most effective strategy to reduce the unacceptably high rate of maternal mortality in many developing countries, especially in low-resource settings.

This thesis consists of four self-contained essays in economics.

Optimal Climate Policy with Household Wealth Inequality. Policy makers concerned with setting optimal carbon taxes to address climate change externalities often employ integrated assessment models (IAMs). While these models differ on their assumptions of climate damage impacts, discounting and technology, they conform on their assumption of complete markets and a representative household. In the face of global inequality and significant vulnerability of asset poor households, I relax the complete markets assumption and introduce a realistic degree of global household inequality. A simple experiment of introducing a range of global carbon taxes shows a household's position on the global wealth distribution predicts the identity of their most preferred carbon price.

Immigration Shocks, Equilibrium Unemployment and Inequality. The purpose of this paper is to present a proof-of-concept model for assessing the impact of immigration shocks on a country's equilibrium unemployment, wages and inequality. The model implements labour market matching in the workhorse heterogeneous agent macro model with precautionary savings. In this setting, I perform several transition experiments exploring the channels and mechanisms through which a substantial immigration shock affects macroeconomic outcomes, including conditional welfare and economic integration. I find that the identity of the immigration cohort, as well as, features of the receiving economy matter for both the magnitude and direction of the response.

Fiscal Multipliers in the 21st Century. Fiscal multipliers appear to vary greatly over time and space. Based on VARs for a large number of countries, we document a strong correlation between wealth inequality and the magnitude of fiscal multipliers. In an attempt to account for this finding, we develop a life-cycle, overlapping-generations economy with uninsurable labor market risk. We calibrate our model to match key characteristics of a number of OECD economies, including the distribution of wages and wealth, social security, taxes, and government debt and study how a fiscal multiplier depends on various country characteristics. We find that the fiscal multiplier is highly sensitive to the fraction of the population who face binding credit constraints and also to the average wealth level in the economy. These findings together help us generate a cross-country pattern of multipliers that is quite similar to that in the data.

Fiscal Consolidation Programs and Income Inequality. Following the Great Recession, many European countries implemented fiscal consolidation policies aimed at reducing government debt. Using three different empirical approaches, we document a strong positive relationship between higher income inequality and stronger recessive impacts of fiscal consolidation. To explain this finding, we develop a life-cycle, overlapping generations economy with uninsurable labor market risk. We calibrate our model to match key characteristics of a number of European economies, including the distribution of wages and wealth, and study the effects of fiscal consolidation programs. We find that higher income risk induces precautionary savings behavior, which decreases the proportion of credit-constrained agents in the economy. Our model produces a cross-country correlation between inequality and the fiscal consolidation multipliers in line with the data.

Human Capital and Development Accounting Revisited. I quantify the effects on development accounting of allowing for imperfectly substitutable labor services.  To estimate the degree of substitutability between skilled and unskilled labor services in a cross-country setting, it is sufficient to estimate the relative price of skilled labor services, and I develop a novel method for estimating this relative price using international trade data. My method exploits the negative relationship between relative prices of skilled labor services and relative export values in skill-intensive industries. I find an approximately constant elasticity of substitution with a value of about 1.3. When integrating my results into a development accounting exercise, I find that efficiency differences in skilled labor are more important than uniform efficiency differences in explaining world income differences. Under the traditional development accounting assumption of neutral technology differences, the skilled labor efficiency differences reflect human capital quality differences, and human capital differences can explain a majority of world income differences. Relaxing the assumption of neutral technology differences, an alternative explanation is that there are large skill-biased technology differences between rich and poor countries.

Price Level Determination When Tax Payments Are Required in Money. We formalize the idea that the price level can be determined by a requirement that taxes be paid in money. We show that if households have to pay a money tax of a fixed real value and the money supply is constant, there is a unique stationary price level, and a continuum of non-stationary deflationary equilibria. The non-stationary equilibria can be excluded if we introduce an arbitrarily lax borrowing constraint. Thus, in the basic model, tax requirements can uniquely determine the price level. When money has liquidity value, tax requirements can exclude self-fulfilling hyperinflations.

Swedish Unemployment Dynamics. We decompose the sources of unemployment variations into contributions from variations in different labor market flows. We develop a decomposition method that allows for a distinction between permanent and temporary employment and slow convergence to the steady state, and we apply the method to the Swedish labor market for the period 1987-2012. Variations in unemployment are driven to an approximately equal degree by variations in (i) flows from unemployment to employment, (ii) flows from employment to unemployment, and (iii) flows in and out of the labor force. Flows involving temporary contracts account for 44% of unemployment variation, even though temporary workers only constitute 13% of the working-age population. Neglecting out-of-steady-state dynamics leads to an overestimation of the importance of flows involving permanent contracts.

Supply Chain Risk and the Pattern of Trade. This paper analyzes the interaction of supply chain risk and trade patterns. We construct a model where an industry's risk sensitivity is determined by the number of customized components that it uses, and countries with a low supply chain risk specialize in risk-sensitive goods. Based on our theory, we construct an empirical measure of risk sensitivity from input-output tables and customization measures. Using industry-level trade data and a variety of risk proxies, we show that countries with a low supply chain risk disproportionately export risk-sensitive goods.

When Does Regression Discontinuity Design Work? Evidence from Random Election Outcomes

We use elections data in which a large number of ties in vote counts between candidates are resolved via a lottery to study the personal incumbency advantage. We benchmark non-experimental regression discontinuity design (RDD) estimates against the estimate produced by this experiment that suggests that there is no personal incumbency advantage. In contrast, conventional local polynomial RDD estimates suggest a moderate and statistically significant effect. Bias-corrected RDD estimates that apply robust inference are, however, in line with the experimental estimate.

Rank Effects in Political Promotions

We study the effect of candidates’ personal vote ranks on promotions to political power in an open-list proportional representation system. Using a regression discontinuity design and data from Finnish local elections, we find that ranking first within a party enhances a politician’s chances of getting promoted to the position of municipal board chair. Our evidence suggests that the mechanism behind the rank effects is primarily unrelated to electoral incentives, but is rather related to party-specific norms or political culture.

Victorian Voting: The Origins of Party Orientation and Class Alignment

Using individual elector level panel data from nineteenth-century United Kingdom poll books, we reassess the development of a party-centered electorate. We show that (i) the electorate was party-centered by the time of the extension of the franchise in 1867; (ii) a decline in candidate-centered voting is largely attributable to changes in the behavior of the working class; and (iii) the enfranchised working class aligned with the Liberal left. Our findings can plausibly explain the subsequent development of the party system.

Class, Social Mobility, and Voting: Evidence from Historical Voting Records

We examine the mechanisms of class-based voting by evaluating the effects of social mobility on voting behavior in the nineteenth-century England. While we do not find any strong evidence of a cleavage along the working and middle class divide, we find that he landed gentry, farm workers, non-skilled workers and white-collar workers voted on average more for the Conservatives, and petty bourgeoisie and skilled workers for the Liberals. The changes in voting behavior due to social mobility are immediate and mainly consistent with the same cleavage.

Public Employees as Politicians: Evidence from Close Elections

We analyze the effect of municipal employees’ political representation in municipal councils on local public spending. One more councilor employed by the public sector increases spending by about 1%. The effect largely comes through the largest party and is specific to the employment sector of the municipal employee.

Politician Quality, Ideology, and Fiscal Policy

Using local councils in Finland as a test bed, I show that (i) electing more high-income, incumbent, and competent politicians improves fiscal sustainability outcomes but does not decrease the size of the public sector, and (ii) symmetrically, electing more university-educated local councilors leads to an increase in public spending without any adverse effects on fiscal sustainability. Survey data reveal that the qualities are differentially associated with economic ideology, and these correlations tally with the policy effects.

Structural Change and Intergenerational Mobility: Evidence from the Finnish War Reparations

This paper presents evidence that government industrial policy can promote new industries, move labor out of agriculture into manufacturing, and have long-term effects via increased human capital accumulation and upward mobility. I use plausibly exogenous variation generated by the Finnish war reparations (1944-1952) that forced the largely agrarian Finland to give 5% of its yearly GDP to the Soviet Union in the form of industrial products. To meet these terms, the Finnish government provided short-term industrial support that persistently raised the employment and production of treated, skill-intensive industries. I trace the impact of the policy using individual-level registry data and show that the likelihood of leaving agriculture for manufacturing and services increased substantially in municipalities more strongly affected by the war reparations shock. These effects were persistent: 20 years after the intervention, the reallocated workers remained in their new sectors and had higher wages. Younger cohorts affected by the new skill-intensive opportunities obtained higher education and were more likely to work in white-collar occupations by 1970. This result is consistent with higher returns to education. Finally, I link parents to children to study how the policy affected upward mobility. I show that mobility in both income and education increased in the exposed locations, as people in lower socioeconomic groups benefited from the structural change.

Tracing Out the Finnish Kuznets Curve: Famine, Threat of Revolution, and Democratization

We study the long-run development of Finland with a particular focus on some causes and consequences of inequality broadly defined. We show that the Finnish famine of 1866-1868 led to increased inequality in the long-run and tighter coercion in the labor markets of the early 1900s. Economic inequality at the time meant political exclusion, as voting rights and vote counts in municipal elections were tied to taxable income. We provide evidence consistent with discontent theories of conflict that these factors contributed to the emergence of the Finnish Civil War in 1918. The threat of revolution became real with the civil war and further led to the successful extension of the franchise. Municipalities with higher levels of inequality and more insurgents experienced a more drastic shift towards equality and higher levels of redistribution after the conflict.

Can You Make an American? Compulsory Patriotism and Assimilation of Immigrants

This paper investigates the success of assimilation efforts in the U.S. during the Age of Mass Migration. I focus on a largely overlooked case of American nation-building, the introduction of compulsory patriotic acts, such as the Pledge of Allegiance, to American schools in the late 19th century. Using a legislative change in the State of New York as an experiment, I show that immigrant children exposed to compulsory patriotism in school were more assimilated as adults, measured by naturalization, the naming of children, military service, and intermarriage. These positive effects on assimilation hold for immigrants from all the large origin countries. Overall, this paper provides evidence that even softer, hearts and minds types of interventions that do not provide any new information can have long-lasting effects.

Droughts and city growth 

  Some researchers and policymakers posit that climate change should increase city growth and urbanization as rising temperatures make rural livelihoods precarious, while others argue that climate change might trap rural households who cannot afford to migrate because of increasing poverty. Existing empirical evidence on the link between climate and urbanization is inconclusive. This chapter exploits novel data mapping city footprint growth for 7,000 cities in 108 low- to middle-income countries across 23 years to provide new evidence on the relationship between drought and urbanization. Cities experience large and persistent declines in built-up area growth rates after major drought events in cities' hinterlands: after 11 years, cities are 0.7 percent smaller compared to a drought-free counterfactual. I show that fully accounting for dynamic effects is essential to correctly understand the relationship between drought and city growth. Consistent with models that envision a drought-migration poverty trap, the negative effects on urbanization are more pronounced for the poorest, and most agricultural countries.

Rapid population growth and city shape 

  Cities in Sub-Saharan Africa are growing rapidly. The urban population has grown ten-fold in the last 50 years, and is projected to keep increasing. What are the consequences of this rapid population growth for city form? In Africa, urban planning has often failed or lagged behind, leaving cities with inadequate infrastructure. Policymakers and researchers have suggested that the rapidity of the rise in urban population is partly to blame, but quantitative and systematic evidence remains scant. I utilize new high resolution data to examine the relationship between population growth and city form. I find that areas in cities which are built up during periods of faster population growth tend to be less densely built, have lower building heights, and are more likely to be exposed to flooding. In addition, these areas have smaller buildings, and are more informal. Together, my findings suggest that urban population growth helps shape the built environment in Sub-Saharan African cities, inducing lower built-up density and more informality.

Trade and pollution: Evidence from India 

  What happens to pollution when developing countries open their borders to trade? Trade might increase production and thus pollution (the scale effect); shift production towards more or less clean industries (the composition effect); or bring with it new technologies or income growth that increases demand for cleaner production (the technique effect). Empirical evidence on the environmental effects of openness to trade in developing countries remains limited. We study the effects of the 1991 trade liberalization reform on water pollution in rivers in India. At the median reduction in district-level tariff exposure, water pollution subsequently rose by 0.12 standard deviations.

    Structural transformation of the labor market and the aggregate economy

Women's increased involvement in the economy has been the most significant change in labor markets during the past century. In this paper, I account for this period of structural change of the labor market in a macroeconomic model, and study how the increase in female labor force participation has affected the economy's response to aggregate shocks. I explicitly model heterogeneity in gender and household composition as well as the historical decrease of the gender wage gap. The model captures the salient features of historical data, including a strong increase in employment among married women, low crowding-out of married men, and relatively stable employment over time for single women. I then study how the changing labor force composition affects the economy's aggregate employment dynamics. The underlying trend in employment, driven by growth in female labor force participation, contributed to the perceived quick employment recovery after recessions before 1990. In general, incorporating both one- and two-person households matters for employment dynamics, with single households reacting more strongly to shocks and employment responses by subgroups changing over time.

Labor supply in a quantitative heterogeneous-agent model

Since long, the labor-supply channel has played a central role in macroeconomic analysis. Nevertheless, it has almost exclusively focused on representative-agent behavior. The aim of this paper is to examine frameworks that are significantly richer in terms of heterogeneity and uncertainty, and assess whether the predictions yielded by the starker frameworks are robust to these extensions.

Subjective life expectancies, time preference heterogeneity and wealth inequality

There is substantial heterogeneity in statistical and perceived life expectancy in the population. In this paper we document a systematic bias in survival beliefs: individuals with low survival probability relative to their peers underestimate their life expectancies, while individuals with high survival probability overestimate. To gauge the effect of heterogeneity in life expectancy on savings rates and ultimately wealth inequality, we introduce shocks to survival beliefs into an otherwise standard overlapping-generations model. We show that such a model exhibits counter-factual savings behavior as individuals increase their savings when their life expectancy drops. Nevertheless, overall wealth inequality in the economy is virtually unaffected by heterogeneity in survival beliefs, contrary to previous literature.

Health dynamics and heterogeneous life expectancies

In this paper, we provide improved estimates for age-dependent health transitions and survival probabilities for different subsamples of the US population. The estimated yearly transition matrices can be used in any life-cycle model where health and survival dynamics is of interest. The results show substantial heterogeneity in life expectancy in the population. For a 70-year-old man in excellent health, the probability of reaching his 80th birthday is around 75%, while the corresponding probability for a man in poor health is just below 40%.

This thesis consists of three essays.

The first essay, “A Theory of Bank Illiquidity and Default with Hidden Trades”, develops a theory of banking to explore how the availability of trading opportunities for both banks and individual investors affects the link between illiquidity and default in the financial system. The results show that default emerges only in the presence of systemic risk, and when an unpredicted crisis hits the economy. Moreover, in contrast to the previous literature, default is not an efficient outcome of the economy.

The second essay, “Financial Liberalization with Hidden Trades”, studies how the availability of unregulated market-based channels for the circulation of liquidity in the financial system affects the process of financial integration, and the efficiency of the corresponding equilibrium, in a two-country economy with comparative advantages. The results show that the only level of integration which the two countries are able to coordinate is the one where the two banking systems are autarkic, but international hidden trades are possible. Moreover, the resulting consumption allocation is constrained efficient.

The third essay, “Bank Liquidity, Stock Market Participation, and Economic Growth”, develops a dynamic growth model with fully microfounded banks and markets to explain the observed decreasing trend in the relative liquidity of many financial systems around the world. The main result characterizes the threshold after which the agents in the economy are rich enough to access the market, where the relative liquidity is lower, and shows that the relative liquidity of the whole financial system (banks and markets) drops because of the increasing market participation. Some evidence consistent with this theoretical prediction is provided: a one-unit increase in an index of securities market liberalization leads to a drop in the relative liquidity of between 13 and 22 per cent.